Is SDLT payable when a freehold is transferred back to a homeowner for a nominal amount with no mortgage debt assumed?

Introduction

Readers often search for this issue when HM Land Registry raises a requisition asking for evidence about Stamp Duty Land Tax (SDLT), especially where a freehold is being transferred between a person and a company they control. The key question is usually whether SDLT is triggered because there is a mortgage somewhere in the background.

The answer depends on what is actually being transferred and whether the transferee is taking on any debt. If the transfer is of a freehold with only nominal value, and the mortgage remains secured only on a separate leasehold title, the SDLT position can be very different from a normal property purchase.

The Question

A homeowner had previously transferred the freehold of a converted dwelling to a company they controlled in order to facilitate a lease extension. They later needed the freehold transferred back into personal ownership because a lender required that structure before proceeding with a remortgage.

The dwelling itself had a substantial market value, and there was an existing mortgage connected with the occupied leasehold flat. However, the freehold interest appeared to have only a nominal value, with modest ground rent and no real commercial value beyond the legal title. The practical concern was whether SDLT had to be paid, or at least reported, when the freehold was transferred back.

Nick’s Explanation

Nick’s reasoning was that the SDLT analysis turned on two critical facts:

• the existing mortgage was secured only against the leasehold title; and
• no part of the freehold transfer involved the transferee assuming any mortgage debt.

On that basis, he explained that the only chargeable consideration for the transfer was the nominal value of the freehold itself, said to be around £100.

As he put it in substance, where debt is not being assumed, Schedule 4 paragraph 8 of the Finance Act 2003 does not bring the mortgage into chargeable consideration. In that situation, one looks only at the actual value given for the freehold transfer.

Nick also noted that if the consideration is below the SDLT notification threshold of £40,000, no SDLT is payable and no SDLT return is required. He therefore concluded that a solicitor could answer the Land Registry requisition by confirming that the consideration was below £40,000 and that no debt was being assumed.

The Law

SDLT is charged on land transactions under Part 4 of the Finance Act 2003. The starting point is that a land transaction may be chargeable unless a relieving provision applies or there is no relevant chargeable consideration.

The main provisions referred to in the explanation are:

• Finance Act 2003, section 49, which provides the basic charge to SDLT;
• Finance Act 2003, section 50, dealing with chargeable consideration; and
• Finance Act 2003, Schedule 4, paragraph 8, under which the assumption of existing debt, including mortgage debt, can count as chargeable consideration.

That means SDLT is not limited to money paid in cash. If a buyer takes property subject to a mortgage, or otherwise takes on debt as part of the transaction, that assumed debt can itself be treated as consideration.

There is also an SDLT notification threshold. Broadly, if the chargeable consideration is less than £40,000, the transaction is generally not notifiable, and no SDLT return is required.

Analysis

The correct analysis is to separate the value of the occupied property from the value of the legal interest actually being transferred.

Step one is to identify the subject matter of the transfer. Here, the transfer was of the freehold title, not the leasehold flat that was occupied and mortgaged. That distinction matters because the leasehold interest may carry most of the practical residential value, while the freehold reversion may have only nominal value.

Step two is to identify the actual consideration. If the freehold is transferred for a nominal amount, such as £100, that is the starting point.

Step three is to ask whether any mortgage debt is being assumed. Under Schedule 4 paragraph 8, assumed debt can increase chargeable consideration. But that only happens if the transferee is in fact taking on debt as part of the land transaction.

Step four is to check what title is charged. If the mortgage is secured only on the leasehold title, and the freehold transfer does not involve taking over that mortgage debt, the mortgage should not be treated as consideration for the freehold transfer.

Step five is to compare the resulting chargeable consideration with the notification threshold. If the only consideration is the nominal freehold value, and that figure is below £40,000, the transaction falls outside SDLT reporting requirements.

On those facts, the existence of a mortgage elsewhere in the ownership structure does not by itself create SDLT on the freehold transfer. The crucial point is whether the debt is attached to, or assumed under, the transaction being considered.

This is different from cases where a property is transferred subject to an existing charge, or where refinancing arrangements mean the transferee effectively takes over secured debt. In those cases, the assumed debt may amount to chargeable consideration even if little or no cash changes hands.

For completeness, where readers are considering whether a property was uninhabitable or not suitable for use as a dwelling for SDLT purposes, the legal threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That authority is not central to this nominal freehold issue, but it is important in cases where SDLT treatment is argued on the basis of condition.

Outcome

If the freehold transfer is genuinely for a nominal amount and no mortgage debt is assumed, the practical conclusion is that:

• no SDLT is payable; and
• no SDLT return is required, because the chargeable consideration is below the £40,000 notification threshold.

In that situation, the appropriate response to HM Land Registry is usually to confirm the consideration figure and explain that no debt is being assumed on the transfer.

Practical Steps

Anyone assessing a similar transfer should work through the following points carefully:

1. Check exactly what interest is being transferred: freehold, leasehold, or both.
2. Obtain the title documents and mortgage documents to confirm which title is actually charged.
3. Confirm in writing whether the transferee is assuming any existing mortgage or other debt.
4. Identify the real value of the interest being transferred, rather than the value of the whole dwelling.
5. Calculate the chargeable consideration under Finance Act 2003, including any debt assumption if applicable.
6. Compare that figure with the SDLT notification threshold.
7. Keep written evidence supporting the position taken, including correspondence, title entries and any valuation basis used for the nominal amount.
8. If HM Land Registry raises a requisition, provide a clear written explanation addressing consideration and debt assumption directly.

Where there is any doubt about whether the mortgage is secured on the transferred title, or whether refinancing arrangements amount to debt assumption, the SDLT position should be checked carefully before completion or registration.

Conclusion

A transfer of a freehold back to a homeowner will not automatically trigger SDLT just because there is a mortgage connected with the property overall. The key question is whether the transferee is assuming debt as part of the transfer. If the mortgage is secured only on a separate leasehold title and the freehold is transferred for a nominal amount, the chargeable consideration may be only that nominal amount, with no SDLT and no SDLT return required.

Legal References Used

• Finance Act 2003, section 49
• Finance Act 2003, section 50
• 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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