Understanding Non-Cash Consideration: Debt Assumption in Property Transfers with Examples

SDLT on transfers of mortgaged property when ownership shares change

Stamp Duty Land Tax can apply when a property is transferred with an existing mortgage, even if no money is paid. HMRC’s approach is to treat the buyer as taking on chargeable debt to the extent their share of the mortgage increases because of the change in ownership.

• SDLT is not limited to cash paid for land; taking on secured debt can also count as chargeable consideration.
• When ownership shares change, the assumed debt is usually measured by comparing the buyer’s share of the debt before and after the transfer.
• If someone moves from 0% to 50% ownership, HMRC treats them as taking on 50% of the outstanding mortgage.
• If a co-owner moves from 30% to 100% ownership, they are treated as taking on an extra 70% of the outstanding mortgage.
• This can apply between family members or joint owners, even where no cash changes hands and regardless of the strict legal wording of the mortgage.
• In practice, you need to check the ownership split before and after the transfer, whether any party is released from debt or indemnified, and the mortgage balance at the effective date.

Scroll down for the full analysis.

SDLT and mortgages: how assumption of debt is measured when ownership shares change

This page explains how Stamp Duty Land Tax can arise when land is transferred subject to an existing mortgage, even if no money is paid between the parties. The key point is that taking on someone else’s share of mortgage debt can count as chargeable consideration. The HMRC material here gives two short examples showing how to measure that debt where ownership shares change.

What this rule is about

SDLT is not limited to cash paid for land. It can also apply where the buyer takes on a liability connected with the property. One common example is a transfer of land subject to an existing mortgage.

Where a person acquires a larger interest in a property and, as part of that change, is treated as taking on more of the secured debt, that assumed debt can count as consideration for SDLT purposes.

This matters particularly in transfers between joint owners, including changes from sole ownership to joint ownership, or from joint ownership to sole ownership.

What the official source says

The HMRC example page deals with assumption or release of debt under Schedule 4 paragraph 8 of Finance Act 2003. It shows that, for these purposes, the amount of debt taken on is measured by comparing the person’s share of the debt before the transaction with their share after it.

In the first example, a property owned by V alone is transferred into joint ownership between V and P in equal shares, subject to an existing mortgage. P is said to assume liability for all or part of the debt. HMRC’s view is that, regardless of P’s actual legal liability under the mortgage, P is treated as assuming debt equal to 50% of the amount outstanding. That is because P is treated as owing nothing before the transaction and 50% after it.

In the second example, V and P already own the property in 70:30 shares. The property is then transferred into P’s sole ownership, still subject to a mortgage. If V is released from the debt, or P agrees to indemnify V, HMRC says P is treated as assuming debt equal to 70% of the amount outstanding. That is because P is treated as owing 30% before the transfer and 100% after it.

What this means in practice

The practical message is that HMRC is looking at the change in the buyer’s economic share of the debt linked to the property, rather than only at the wording of the mortgage documents.

So if someone acquires a share in mortgaged property, or increases their share, SDLT may be charged by reference to the extra proportion of the mortgage they are treated as taking on.

This can happen even where:

• no cash changes hands,
• the transfer is between family members or co-owners, or
• the transferee does not become solely liable to the lender in a strict legal sense.

The examples also show that the relevant amount is not automatically the whole mortgage. It is the increase in the person’s share of the debt as a result of the transaction.

How to analyse it

A sensible way to analyse this kind of transfer is:

• Identify who owned the property before the transfer, and in what shares.
• Identify who owns it after the transfer, and in what shares.
• Check whether the property remains subject to an existing mortgage or other secured debt.
• Ask whether, as part of the transaction, one party is being released from debt or another party is taking responsibility for a greater share of it.
• Measure the increase in the transferee’s treated share of the debt by comparing their position before and after the transfer.

On the HMRC examples, the calculation works by reference to ownership proportions:

• If a person goes from 0% ownership to 50% ownership, they are treated as taking on 50% of the outstanding debt.
• If a person goes from 30% ownership to 100% ownership, they are treated as taking on an additional 70% of the outstanding debt.

The source material is brief, but the underlying point is that you should not ask only, “Who is named on the mortgage?” You should also ask, “How has this transaction changed each party’s share of the debt for SDLT purposes?”

Example

Illustration: A owns a property worth an amount that does not matter for this point, and there is an outstanding mortgage of £200,000.

A transfers the property into the joint names of A and B in equal shares. No cash is paid. Under HMRC’s approach in the example, B is treated as taking on 50% of the mortgage debt. The chargeable consideration would therefore be £100,000, being 50% of the outstanding mortgage.

By contrast, if A and B already owned the property 70:30 and B became sole owner, B would be treated as increasing their share of the debt from 30% to 100%. On an outstanding mortgage of £200,000, that would mean assumed debt of £140,000.

Why this can be difficult in practice

The official examples are simple, but real transactions are often less neat.

One difficulty is the relationship between legal liability to the lender and the SDLT treatment. HMRC’s first example expressly says that the result applies “notwithstanding” P’s actual liability, which may in fact be for all of the debt. That shows HMRC is using a deemed allocation based on the change in ownership shares, rather than simply following the lender’s contractual rights.

Another difficulty is deciding whether there has been a release of debt or an indemnity in substance. In the second example, HMRC assumes that V is released from the debt or that P indemnifies V. If that element is missing or unclear, the analysis may be more fact-sensitive.

A further practical issue is identifying the correct amount of debt outstanding at the effective date of the transaction, because the assumed debt is measured by reference to the amount owing.

These points matter because small changes in facts can affect whether there is chargeable consideration at all, and if so how much.

Key takeaways

• When land is transferred subject to a mortgage, SDLT can arise even if no cash is paid.
• HMRC’s examples measure assumed debt by the increase in the transferee’s share of the property, and therefore their treated share of the debt, before and after the transfer.
• In changes between co-owners, the key question is usually not the whole mortgage amount, but the extra proportion of debt the transferee is treated as taking on.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Non-Cash Consideration: Debt Assumption in Property Transfers with Examples

View all HMRC SDLT Guidance Pages Here