Do You Pay SDLT on a Mortgage Again When Buying Out a Co-Owner’s Share?

Introduction

A common SDLT question arises when family members buy a home together and, later on, one set of owners buys out the others. People often expect Stamp Duty Land Tax to be charged on the amount paid for the departing owners’ share. The difficulty usually starts when a conveyancer or lender also treats part of an existing mortgage as extra chargeable consideration.

This article explains the SDLT position where a couple originally bought a property jointly with relatives, SDLT was paid on the full purchase price at the outset, and the couple later remortgage in order to acquire the relatives’ share. The key issue is whether SDLT is due only on the cash paid for the share, or also on a notional share of the outstanding mortgage.

The Question

A family of four bought a residential property together for £910,000. Two family members funded £455,000 in cash. The other two funded the balance with a mortgage of £455,000. Legal ownership was recorded equally, with each person holding a 25% share, and SDLT was paid on the original acquisition.

Some years later, the couple wished to buy out the other two owners’ combined 50% share for £415,000. By then, the outstanding mortgage balance was about £368,000, and the couple were remortgaging to fund the buyout.

The concern was whether SDLT should be charged only on the £415,000 paid for the 50% share, or whether HMRC would also treat £184,000, being half of the outstanding mortgage, as additional chargeable consideration.

Nick’s Explanation

Nick’s explanation was that the starting point is the statutory definition of chargeable consideration. SDLT is charged on money or money’s worth given for the land transaction, and in some cases the assumption of secured debt can count as consideration as well.

However, in this scenario, his view was that the relevant consideration was the £415,000 being paid for the departing owners’ 50% share, and not an additional amount based on the existing mortgage balance.

In anonymised form, Nick’s reasoning was:

• the mortgage already existed at the time of the original purchase;
• SDLT had already been paid on the full £910,000 acquisition;
• the later transaction involved the purchase of the co-owners’ share for £415,000;
• the buyers were refinancing the existing borrowing rather than taking over a separate debt owed by the outgoing owners.

He concluded that there was no additional “assumed debt” under Schedule 4 paragraph 8 of the Finance Act 2003 on these facts, and that the SDLT calculation should therefore be based on the £415,000 consideration alone.

On that basis, using the standard residential rates and assuming the buyers did not own another dwelling so that the higher rates did not apply, Nick calculated SDLT at £10,750:

• 0% on the first £125,000 = £0
• 2% on the next £125,000 = £2,500
• 5% on the remaining £165,000 = £8,250

The Law

The main legislation is in the Finance Act 2003.

Section 42 provides that SDLT is charged on land transactions. Section 50 and Schedule 4 deal with chargeable consideration.

Schedule 4 paragraph 1 states, in substance, that chargeable consideration includes money or money’s worth given for the subject matter of the transaction.

Schedule 4 paragraph 8 is the provision often considered in transfer of equity cases. Broadly, where a person acquires a chargeable interest and assumes liability for an existing debt secured on the property, the debt assumed can count as chargeable consideration.

That rule is important in many intra-family transfers and transfers of equity. For example, if one joint owner is released from liability under a mortgage and the remaining owner takes on that liability as part of the transfer, the amount of debt assumed may form part of the SDLT consideration.

But the legal analysis depends on the actual facts and beneficial arrangements, not just the fact that a mortgage exists somewhere in the background.

Analysis

The SDLT analysis can be broken down into four steps.

First, identify what interest is being acquired. Here, the couple are acquiring the other co-owners’ 50% share in the property.

Second, identify what is being given in return. The obvious consideration is the £415,000 paid to the outgoing owners.

Third, ask whether there is any additional non-cash consideration, especially debt assumption under Schedule 4 paragraph 8. This is where many transfer of equity questions turn.

Fourth, decide whether the remortgage is simply financing the purchase, or whether it also involves the buyers assuming a debt that previously formed part of the outgoing owners’ own liability in a way that counts as consideration for SDLT purposes.

On the facts presented, the argument against adding the £184,000 mortgage element is as follows:

• the original acquisition was already taxed on the full purchase price;
• the later transaction is a separate acquisition of a 50% share;
• the outgoing owners are being bought out for an agreed price of £415,000;
• the remortgage is being used to fund that purchase, rather than to transfer a fresh item of value from the outgoing owners to the buyers;
• the buyers are not, on this analysis, assuming debt from the outgoing owners as additional consideration for the transfer.

That is why Nick’s view was that SDLT should be charged on £415,000 only.

It is important, however, to understand why this area can be contentious in practice. Conveyancers often look at who is on the legal title and who is named on the mortgage. If outgoing owners are formally liable to the lender and are released when they transfer their share, some advisers may regard the release of that liability as debt assumption by the remaining owners. In straightforward transfer of equity cases, that can indeed create chargeable consideration.

The strength of the position here depends on the full facts, including:

• the terms of the original trust arrangement;
• whether the outgoing owners were only legal co-borrowers for lender requirements;
• whether the mortgage debt was in substance borne entirely by the remaining owners from the start;
• how the transfer and remortgage documents are drafted;
• whether the beneficial ownership and debt position can be evidenced clearly.

In short, the existence of an outstanding mortgage does not automatically mean SDLT is charged again on a share of that mortgage. The question is whether there is, in law and in substance, an assumption of secured debt forming part of the consideration for the acquisition.

Outcome

On the facts described, the practical conclusion is that SDLT should be calculated on the £415,000 paid for the 50% share, without adding a further £184,000 as assumed mortgage debt.

Using the standard residential rates stated in Nick’s explanation, that produces SDLT of £10,750, assuming the buyers are not subject to the higher rates for additional dwellings.

If either buyer owns another residential property at completion and the transaction does not qualify for replacement of a main residence treatment, the higher rates may need to be considered separately.

Practical Steps

If you are in a similar position, the following steps are sensible:

• obtain the Land Registry title and any declaration of trust or deed of trust;
• identify the exact beneficial ownership split before the transfer;
• confirm the agreed price being paid for the outgoing owner’s share;
• review the mortgage documents to see who is liable to the lender and whether any party is being released from liability;
• check whether the remortgage is simply funding the purchase or whether it changes the debt position in a way that may count as chargeable consideration;
• consider whether the higher rates for additional dwellings apply at completion;
• ask your conveyancer to explain precisely why any mortgage element is being included in the SDLT return, with reference to Finance Act 2003 Schedule 4 paragraph 8.

If the property is in poor condition and anyone suggests the dwelling is not suitable for use so that different SDLT treatment might apply, take care. The condition threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Ordinary disrepair, age, or the need for renovation will often not be enough.

Conclusion

Where co-owners are bought out and the buyers remortgage to fund the purchase, SDLT is not automatically charged on a share of the existing mortgage as well as the cash price. The correct result depends on whether there is genuine assumed debt forming part of the consideration. On the facts discussed here, the better view is that the chargeable consideration is the £415,000 paid for the outgoing owners’ share.

Legal References Used

• Finance Act 2003, section 42
• Finance Act 2003, section 50(1)
• Finance Act 2003, Schedule 4, paragraph 1
• Finance Act 2003, Schedule 4, paragraph 8
• 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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