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Transfers between spouses


Client query:

John and Alana are married and own their marital home in joint names. In addition, John holds a property in his sole name which he purchased before the marriage and which is currently let out.

John is a higher-rate taxpayer and would therefore like to transfer 50% of the property to Alana, to utilise her basic rate band in respect of the rental income.

The couple have been told by friends that there is no SDLT on gifts with Nil consideration but they just wanted to confirm the position.


Chargeable consideration

Typically SDLT is payable on the amount of money exchanged in a land transaction.

The couple’s friends are also correct that the SDLT legislation provides a specific exemption where there is no chargeable consideration given for the transaction.

Special rules concerning the assumption of debt

However, there are special provisions which provide that the assumption of debt will constitute chargeable consideration for the purposes of SDLT.

Therefore, although no money will be exchanged in the transfer of the 50% interest in the property to Alana, the mortgage provider has stipulated that Alana must take on 50% of the existing mortgage, being £75,000 (total mortgage is £150K).

Accordingly, the chargeable consideration in respect of the assumption of debt will be £75,000.

On first principles, the 3% higher rates of SDLT would be applied to this land transaction as the couple also hold an interest in the family home. However, following an amendment made by FA 2018, the higher rates do not apply in transactions involving spouses purchasing from one another.

In this case, the chargeable consideration (£75,000) is within the 0% threshold, resulting in no SDLT being payable. However, as the chargeable consideration is above £40,000 an SDLT return would be required to be submitted (reflecting £Nil SDLT).

If, however, 50% of the mortgage exceeded £125,000, SDLT is payable even though the transfer was by way of a gift with no actual consideration being paid.

The rules governing SDLT are becoming increasingly complex. If in doubt, seek professional advice.

If you have any queries around SDLT please do not hesitate to get in contact via our SDLT Advisory Service.

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