Do you pay SDLT when transferring a personally owned property to your own limited company?

Introduction

Many landlords and homeowners look at moving a property into a limited company or SPV for mortgage, income tax, or long-term planning reasons. A common question is whether Stamp Duty Land Tax (SDLT) is based on the cash the company actually pays, or on the full market value of the property.

This matters because some owners plan a part-sale and part-gift arrangement, where the company pays only a small amount and the rest is treated as gifted equity. In connected party cases, that approach does not usually reduce the SDLT charge. The SDLT rules can substitute market value instead.

The Question

A married couple jointly own a residential property worth about £400,000. They want to transfer it to their own UK property company. The company would pay only £75,000 in cash, with the remaining £325,000 treated as equity gifted by the couple. The couple are the company’s directors and shareholders.

The property was their main residence for many years, but they later moved out and let it to a tenant for around two years. They want to know:

• whether SDLT is charged on £75,000 or on the full market value;
• what the broad tax position is on the transfer; and
• whether the gifted equity can later be drawn back from the company.

Nick’s Explanation

Nick’s key point was that where a property is transferred into a limited company connected with the transferors, SDLT is generally charged by reference to the property’s market value, not just the amount of cash paid.

In anonymised form, his explanation was:

“If a property is transferred into a limited company, irrespective of the consideration, SDLT will have to be paid based on the market value of the property.”

He also referred to HMRC’s guidance on transfers to and from a company, which states that SDLT may be payable on market value where the person transferring the property is connected with the company.

He further noted that the higher residential rates may apply.

The Law

The main SDLT rule is in the Finance Act 2003. SDLT is normally charged on chargeable consideration, but special market value rules can apply in connected company transactions.

For a transfer of land to a company, section 53 of the Finance Act 2003 is central. In broad terms, where a person transfers land to a company and that person is connected with the company, the transaction is treated for SDLT purposes by reference to the market value of the subject matter of the transaction, rather than the lower amount actually paid.

That means a transfer to a company owned or controlled by the same individuals will often be taxed on full open market value.

If the property is residential, the company may also be subject to the higher residential rates. Companies buying dwellings are commonly within the higher rate regime unless a specific relief or exception applies.

HMRC’s published guidance on transferring ownership of land or property reflects this position and explains that where property is transferred to a company by a connected person, SDLT may be payable on market value rather than actual consideration.

Analysis

Step 1: identify whether the company is connected with the transferors.

Here, the transferors are the individuals who own the property, and the buyer is a company they own and control. That is the classic connected party situation. So the market value rule is engaged.

Step 2: identify the relevant SDLT base.

Because the transfer is to a connected company, SDLT is not calculated only on the £75,000 cash payment. Instead, the starting point is the property’s market value at the effective date of the transaction. On the facts given, that is about £400,000.

Step 3: consider whether “gifted equity” changes the SDLT result.

For SDLT purposes in this type of connected company transfer, calling part of the value “gifted equity” does not usually reduce the tax base. If market value substitution applies, SDLT is still charged on the market value. So a structure under which the company pays £75,000 and receives the remaining value by gift does not avoid the market value rule.

Step 4: consider the rates.

Because the property is a dwelling and the purchaser is a company, the higher residential rates are likely to apply. The exact SDLT figure depends on the rates in force on the effective date and whether any relief is available. On the facts provided, no obvious SDLT relief is identified.

Step 5: distinguish SDLT from CGT and company accounting.

Nick did not advise on CGT, and that is a separate issue. Broadly, however, transfers to a connected company can also trigger capital gains treatment by reference to market value, subject to any available reliefs. The fact that the property used to be the couple’s main residence may be relevant to private residence relief, but the later letting period and current rules need detailed review. That is a CGT question rather than an SDLT one.

As for the £325,000 “gifted equity”, whether the couple can later extract that value depends on how the transaction is legally documented and accounted for. If the amount is intended to be repayable, it would usually need to be structured properly, for example as a director’s loan or other recognised balance sheet item. If it is a true gift or capital contribution, it is not automatically something that can simply be withdrawn later tax-free on demand. That point needs company law, accounting, and tax advice together.

Step 6: note that habitability arguments are different and usually irrelevant here.

Some readers ask whether a dwelling can be treated as non-residential or unsuitable for use. In an uninhabitable or not suitable for use case, the condition thresholds are now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That authority makes clear that ordinary disrepair, dated condition, or the need for works will often not be enough. In a standard transfer of a let residential property to a connected company, this line of argument is unlikely to assist unless the facts are exceptional.

Outcome

On the facts described, the practical SDLT answer is that the transfer to the couple’s own SPV is likely to be taxed on the property’s full market value, not the £75,000 cash payment. The “gifted equity” element does not normally reduce the SDLT charge where the transfer is to a connected company.

The higher residential SDLT rates are also likely to apply.

The CGT and extraction-of-funds issues require separate detailed advice, because they depend on the transfer value used for tax, the availability of any reliefs, and how the transaction is documented in the company accounts.

Practical Steps

• Obtain a reliable open market valuation of the property as at the proposed transfer date.
• Check the SDLT rates in force on the intended completion date and calculate the likely SDLT on market value.
• Take separate CGT advice before proceeding, especially where the property was once a main residence and has later been let.
• Decide how any non-cash element is to be documented: gift, capital contribution, share issue, or director’s loan all have different consequences.
• Ensure the legal transfer documents, company accounts, and tax filings all describe the transaction consistently.
• Do not assume that calling part of the value “gifted equity” will reduce SDLT in a transfer to a connected company.
• If anyone is considering arguing that the property was not suitable for use as a dwelling, review the facts carefully against Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, because the threshold is now high.

Conclusion

Where individuals transfer a dwelling to their own limited company, SDLT is usually based on market value if they are connected with that company. A part-sale and part-gift structure does not usually change that result. In a case like this, the key next steps are to confirm market value, calculate SDLT on that figure, and take separate CGT and accounting advice before the transfer is carried out.

Legal References Used

• Finance Act 2003, section 53
• HMRC guidance: SDLT: transferring ownership of land or property
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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