Do you pay SDLT on a land swap between family members if no money changes hands?

Introduction

People often assume that Stamp Duty Land Tax (SDLT) only applies when money is paid. In straightforward purchases, that is often how the issue is first understood. But SDLT can also apply where land is transferred in exchange for other land, even if no cash changes hands.

This point commonly arises where neighbouring owners, including family members, agree to alter boundaries, swap parts of gardens, adjust parking arrangements, or regularise access. The legal question is not simply whether money is paid. It is whether there is “chargeable consideration” for SDLT purposes, and in an exchange of land the legislation contains special rules.

The Question

Two related homeowners each own adjoining residential properties. They want to redraw the boundary between the two plots by transferring small parcels of land to each other so that the gardens, paths and parking areas match a new agreed layout.

No money will be paid by either side. A valuation has been obtained suggesting that the land each person will receive has a market value of about £69,000. They want to know whether SDLT is payable and, if so, whether the higher rates for additional dwellings apply.

Nick’s Explanation

Nick’s reasoning was that this is not ignored for SDLT just because no cash is changing hands. In anonymised form, his key point was:

“The transfer is treated as an exchange. For SDLT, that means each side is looked at as a separate land transaction, and the chargeable consideration is based on the market value of the land being acquired.”

He explained that the exchange is treated as two distinct transactions under section 47 Finance Act 2003. Each person is treated as acquiring land from the other. The relevant consideration is not zero merely because no payment is made in cash. Instead, the legislation substitutes market value in an exchange case.

On the facts provided, if each person is acquiring land worth £69,000, each transaction is above the £40,000 notification threshold. That means an SDLT return would generally be required for each transaction.

Nick also identified that the SDLT rate depends on the wider property position of each person. If the purchaser is caught by the higher rates for additional dwellings, tax may be payable. If not, the ordinary residential rates may produce no SDLT liability at that level of consideration, although a return may still be needed.

The Law

The main provisions are in Finance Act 2003.

Section 42 Finance Act 2003 provides that SDLT is charged on land transactions.

Section 47 Finance Act 2003 deals with exchanges. Where one land transaction is entered into wholly or partly in consideration of another land transaction, each transaction is treated separately for SDLT purposes.

Paragraph 5 of Schedule 4 to Finance Act 2003 provides the valuation rule for exchanges. In broad terms, where land is acquired in exchange for other land, the chargeable consideration is taken to be the market value of the subject matter acquired.

Section 77A Finance Act 2003 sets out when a land transaction must be notified to HMRC. For residential transactions, the £40,000 threshold is important. If the chargeable consideration is less than £40,000, the transaction is generally not notifiable. If it is £40,000 or more, a return is usually required unless a specific exception applies.

Whether the higher rates for additional dwellings apply depends on the rules in Schedule 4ZA to Finance Act 2003. Broadly, those rules can apply if, at the end of the day of the transaction, the purchaser owns more than one dwelling and the purchase is not a replacement of the purchaser’s only or main residence.

Analysis

The analysis can be broken down into four steps.

First, identify whether there is a land transaction. A transfer of part of a garden, driveway, access strip or parking area is still a transfer of a chargeable interest in land. So a boundary adjustment involving a transfer of ownership is capable of being an SDLT transaction.

Second, decide whether this is an exchange. If each side gives land and receives land, that is an exchange for SDLT purposes, even if neither side pays cash. Section 47 applies.

Third, work out the chargeable consideration. In an ordinary purchase, this is often the price paid. In an exchange, paragraph 5 of Schedule 4 substitutes market value. So if one owner receives land worth £69,000, that owner’s chargeable consideration is treated as £69,000. The same analysis is then applied to the other owner’s acquisition.

Fourth, apply the rates and filing rules. At £69,000, the transaction is above the £40,000 notification threshold, so a return is generally required. Whether any SDLT is actually payable depends on the applicable rate band and whether Schedule 4ZA applies.

If the purchaser is not subject to the higher rates, a residential acquisition at £69,000 may fall within the nil rate band, producing no SDLT liability. But the filing obligation can still remain because the consideration exceeds £40,000.

If the purchaser is subject to the higher rates for additional dwellings, SDLT may be payable even at that level. On the figures discussed in Nick’s explanation, 5% of £69,000 would produce SDLT of £3,450 for that purchaser.

The fact that the parties are siblings does not by itself remove the SDLT charge. Family transactions are not exempt merely because they are informal, cooperative, or involve no cash. The legislation focuses on the legal transfer and the chargeable consideration.

It is also important to distinguish a transfer of land from the grant of rights. In some cases, what the parties really need is not a transfer of ownership but a right of way, licence, easement, or other formal right. That can change the SDLT analysis, although such arrangements can still have tax consequences and need careful legal drafting.

Outcome

On the facts described, the arrangement is likely to be treated as two separate SDLT land transactions. Each person is treated as acquiring land from the other for market value consideration.

If the market value of the land acquired by each person is about £69,000, each transaction is likely to be notifiable because it exceeds £40,000.

Whether any SDLT is actually payable depends on whether the purchaser is within the ordinary residential rates or the higher rates for additional dwellings. If the higher rates apply, SDLT may be due. If they do not apply, the tax liability may be nil, but a return may still need to be filed.

Practical Steps

Anyone in this position should work through the following points carefully:

• Confirm exactly what is being transferred. Is it ownership of land, or would rights over the land achieve the same practical result?
• Obtain a proper valuation of the land being acquired by each side. In an exchange, market value is central.
• Check whether the valuation reflects the true open market position for a small parcel of land with limited standalone use.
• Consider whether each transaction is above or below the £40,000 notification threshold.
• Review each purchaser’s wider property ownership at the effective date of the transaction to see whether Schedule 4ZA may apply.
• Check whether either party is replacing an only or main residence, as that can affect the higher rates analysis.
• Ensure the transfer documentation and SDLT returns, if required, match the legal and valuation position.

If anyone is considering arguing that a dwelling is uninhabitable or not suitable for use as a dwelling in another SDLT context, they should be aware that the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Conclusion

No cash changing hands does not automatically mean no SDLT. Where land is swapped, the exchange rules in Finance Act 2003 can treat each side as giving market value consideration for the land received. In a boundary adjustment or land swap between family members, the key questions are the market value of the land acquired, whether the transaction is notifiable, and whether the higher rates for additional dwellings apply.

Legal References Used

• Finance Act 2003, section 42
• Finance Act 2003, section 47
• Finance Act 2003, section 77A
• Finance Act 2003, Schedule 4, paragraph 5
• 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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