How much SDLT is due when buying out a co-owner’s share of a second property?

Introduction

People often ask how Stamp Duty Land Tax (SDLT) works when they already own part of a property and want to buy the other owner’s share. The confusion usually comes from two points: whether SDLT is charged only on the extra equity being acquired, and whether mortgage debt taken over counts as part of the price.

In a typical buyout of a co-owner’s share, SDLT is not based on profit or net gain. It is based on the chargeable consideration given for the acquisition. If the property is an additional dwelling, the higher rates may also apply.

The Question

A taxpayer jointly owns a buy-to-let flat with another person. The taxpayer already owns 50% outright. The other 50% was originally funded with borrowing, and the taxpayer was also named on the mortgage for lender reasons.

The flat has increased in value, and the taxpayer now wants to buy the other owner’s 50% share for £130,000. The proposed funding is:

• £13,000 cash
• about £30,000 by taking over part of the existing mortgage on a transfer of equity
• about £87,000 from a new mortgage

The property is not the taxpayer’s only or main residence. The question is whether SDLT is:

• £3,900, on the basis of a 3% surcharge on £130,000
• £1,800, on the basis of tax on a £60,000 net gain
• £6,600, on the basis of the full SDLT calculation at the higher rates

Nick’s Explanation

Nick’s reasoning can be summarised as follows.

First, buying the other owner’s share is a chargeable land transaction because the taxpayer is acquiring a further chargeable interest in land.

Second, the relevant figure is the chargeable consideration for the acquisition. In practical terms, that includes not just cash paid to the seller, but also mortgage debt taken over where the seller is released from liability.

Nick explained the point in substance like this: the amount given for the seller’s share includes cash and any mortgage liability assumed as part of the transfer, so the total consideration on the facts is £130,000.

He then applied the residential SDLT rules and the higher rates for additional dwellings. Because the flat will remain an additional property rather than a replacement of the taxpayer’s only or main residence, the higher rates regime applies.

Nick’s conclusion was that £3,900 is not correct because the higher-rates uplift is now 5 percentage points, not 3. He also rejected the idea that SDLT is charged only on a £60,000 net gain. SDLT is charged on chargeable consideration, not on profit, increase in equity, or economic gain.

On the stated facts, his conclusion was that SDLT would be £6,600.

The Law

SDLT is charged on land transactions involving the acquisition of a chargeable interest in land in England or Northern Ireland. The key statutory framework is in the Finance Act 2003.

• Finance Act 2003, section 42 and related charging provisions identify what counts as a chargeable interest and a land transaction.
• Finance Act 2003, section 50 provides that chargeable consideration is determined in accordance with Schedule 4.
• Finance Act 2003, Schedule 4 sets out what counts as chargeable consideration, including money and money’s worth. Assumption of debt can count as consideration.
• Finance Act 2003, section 55 contains the rate calculation for residential transactions.
• Finance Act 2003, Schedule 4ZA modifies section 55 where the higher rates for additional dwellings apply.
• Finance Act 2003, section 75ZA can impose a further 2% surcharge in certain non-resident transactions.

Where a purchaser takes over an existing mortgage or releases the seller from mortgage liability, that assumed debt is generally treated as part of the consideration for SDLT purposes. This is an established SDLT principle under the consideration rules.

If the property being acquired is an additional dwelling and the purchase is not part of replacing the purchaser’s only or main residence, Schedule 4ZA usually applies. Under the rules referred to in Nick’s explanation, that means the normal residential rates are increased by 5 percentage points.

If a case instead turns on whether a dwelling was unsuitable for use as a dwelling at the effective date, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That authority is important in uninhabitable or not suitable for use cases, although it is not the deciding issue on the facts discussed here.

Analysis

The SDLT position can be worked through in stages.

1. Identify the transaction

The taxpayer is not merely rearranging ownership informally. They are acquiring the co-owner’s 50% share. That is a land transaction for SDLT purposes.

2. Identify the chargeable consideration

The agreed value for the share being acquired is £130,000. The fact that the funding is split between cash, assumption of existing mortgage debt, and a new mortgage does not reduce the consideration.

The important point is that SDLT looks at what is given for the acquisition. If part of the deal is that the seller is released from mortgage liability, that debt assumption is part of the consideration.

So on these facts, the chargeable consideration is £130,000, not merely the taxpayer’s perceived gain in equity.

3. Reject the “net gain” approach

SDLT is not a tax on profit. It is not charged by comparing the value of the share acquired with the buyer’s previous equity position. It is a transaction tax charged on the consideration given for the interest acquired.

That is why the suggested figure of £1,800 based on a supposed £60,000 gain is not the correct method.

4. Consider whether the higher rates apply

The flat is not the taxpayer’s only or main residence, and the transaction is not described as a replacement of an only or main residence. On that basis, the higher rates for additional dwellings apply under Schedule 4ZA.

5. Calculate the SDLT

Using the figures stated in Nick’s explanation:

• 0% on the first £125,000 = £0
• 2% on the next £5,000 = £100
• Higher-rates uplift of 5% on £130,000 = £6,500

Total SDLT = £6,600.

6. Why £3,900 is not correct

The suggested £3,900 assumes a 3% surcharge only. That does not match the rates set out in Nick’s explanation. On the basis used there, the uplift is 5 percentage points, not 3.

7. Points that could change the result

The result could differ if, for example:

• the transaction involved replacement of the taxpayer’s only or main residence within the Schedule 4ZA rules
• the seller was not being released from any mortgage liability, so the consideration analysis was materially different
• the purchaser was non-UK resident for SDLT purposes, in which case section 75ZA might add a further 2%
• the property was said to be uninhabitable, though any such argument now faces a relatively high threshold after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

Outcome

On the facts given, the practical answer is that SDLT is calculated on the full £130,000 chargeable consideration, not on any net gain or increase in equity.

Because the flat is an additional dwelling, the higher rates apply. On the calculation set out above, the SDLT due is £6,600.

Practical Steps

If you are assessing a similar buyout, work through these points carefully:

• Confirm exactly what share is being acquired and for what agreed price.
• Check whether any existing mortgage debt is being assumed, and whether the outgoing owner is being released from liability.
• Add together all forms of consideration, not just cash.
• Decide whether the property will count as an additional dwelling at completion.
• Check whether the transaction could qualify as a replacement of your only or main residence under Schedule 4ZA.
• Check residence status for SDLT purposes in case section 75ZA applies.
• Review the SDLT return and completion statement so that the consideration figure matches the legal and mortgage documents.

Where there is a transfer of equity and an existing mortgage, the SDLT treatment often turns on the exact legal effect of the transfer and lender release, so the conveyancing documents matter.

Conclusion

When you buy out a co-owner’s share of a second property, SDLT is generally charged on the full consideration given for that share, including mortgage debt taken over, not on profit or net equity gain. On the facts discussed here, the correct SDLT figure is £6,600.

Legal References Used

• Finance Act 2003, section 42 and related SDLT charging provisions
• Finance Act 2003, section 50
• Finance Act 2003, section 55
• Finance Act 2003, section 75ZA
• Finance Act 2003, Schedule 4
• Finance Act 2003, Schedule 4ZA
• 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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