Is SDLT payable when co-owners vary a deed of trust and one buys out the other?

Introduction

People often ask whether Stamp Duty Land Tax (SDLT) is due when unmarried co-owners separate and change the ownership shares in their home. The point can be confusing where the property is already owned jointly, there is a declaration of trust, and one party is giving up part or all of their interest for a reduced payment.

The key issue is usually this: SDLT is not charged by looking at the value of what the buyer ends up with overall. Instead, it is charged by looking at the consideration given for the transfer. That includes not just cash, but also any mortgage debt taken over as part of the transaction.

The Question

Two cohabiting owners hold a residential property as tenants in common. One owner contributed a substantial amount to the original purchase price, while the rest was funded by a joint mortgage. A trust deed says that on sale or separation one owner receives a fixed amount from the equity first, and the remaining equity is then divided equally.

They now wish to change matters so that the departing owner receives a smaller fixed sum and the remaining owner keeps the rest. The question is whether SDLT should be worked out by reference to the full extra equity retained by the remaining owner, or only by reference to what that owner gives in return for the departing owner’s share.

Nick’s Explanation

Nick’s reasoning was that SDLT is charged on the chargeable consideration for the transfer, not on the total value of the interest the remaining owner ends up holding after the variation.

In anonymised form, his explanation was:

“When a property interest is transferred, SDLT is payable on the chargeable consideration, which includes any cash paid and the value of any debt, such as a mortgage, that the transferee assumes responsibility for.”

Using the figures provided:

• Property value: £730,000
• Outstanding mortgage: £287,000
• Equity: £443,000

Under the original trust arrangement:

• One owner was entitled to £150,000 first
• The remaining equity of £293,000 was split equally
• That gave the first owner a total beneficial entitlement of £296,500
• The other owner’s beneficial entitlement was £146,500

Under the proposed new arrangement:

• The departing owner would receive £80,000
• The remaining owner would keep the rest of the equity

Nick’s conclusion was that the relevant SDLT consideration was:

• £80,000 paid to the departing owner, plus
• the share of mortgage debt taken over from that owner

Assuming the mortgage liability is borne equally between them, half of the mortgage is £143,500. That produces total chargeable consideration of £223,500.

On that analysis, the consideration falls below the £250,000 residential nil-rate threshold, so no SDLT would be payable.

The Law

SDLT is charged under the Finance Act 2003 on land transactions involving chargeable consideration. The main rules relevant here are these:

• A transfer of an interest in land can be a land transaction for SDLT purposes.
• Chargeable consideration includes money or money’s worth given for the transfer.
• Where the buyer takes property subject to an existing mortgage, or assumes responsibility for debt secured on the property, that assumed debt can count as chargeable consideration.
• In transactions between co-owners, SDLT is generally concerned with what is given for the share being acquired, not the market value of the whole property, unless a special market value rule applies.

In practical terms, where one co-owner buys out another, the SDLT calculation usually includes:

• any cash paid to the outgoing owner; and
• any mortgage debt attributable to the outgoing owner’s share that the remaining owner takes over.

The fact that one owner may already have had a larger beneficial entitlement under a trust deed does not itself create a separate SDLT deduction. The question is still what consideration is being given for the transfer now taking place.

Analysis

Step 1 is to identify the transaction. The relevant transaction is the transfer of the departing owner’s beneficial and legal interest, or enough of it to leave the remaining owner with the whole property.

Step 2 is to identify the consideration. In a case like this, that is not the full amount of equity the remaining owner ends up with. It is what the remaining owner gives in exchange for the departing owner’s interest.

Step 3 is to separate out the two parts of the consideration:

• Cash consideration: £80,000
• Debt consideration: the departing owner’s share of the mortgage

If the mortgage liability is split equally, the departing owner’s share of the mortgage is £143,500. That amount is treated as consideration because the remaining owner is effectively taking over that debt burden.

Step 4 is to total the consideration:

£80,000 + £143,500 = £223,500

Step 5 is to apply the SDLT residential rates in force for the transaction. On the figures given, £223,500 falls below the £250,000 nil-rate threshold referred to in Nick’s reply, so the SDLT due would be nil.

The alternative approach suggested in the question does not fit the way SDLT works. It is not correct to start with the whole property value, subtract the mortgage and the outgoing owner’s payment, and then tax the balance kept by the remaining owner. SDLT is not charged on retained equity as such.

It is also not correct to reduce the SDLT calculation simply by deducting the first owner’s earlier priority entitlement under the trust deed. That earlier entitlement helps show the parties’ beneficial interests, but SDLT still turns on the actual consideration for the transfer now being made.

The only note of caution is that this analysis depends on the mortgage debt truly being shared equally and on there being an actual transfer for consideration between the co-owners. If the mortgage liability is not in fact split equally, or if the lender does not release one party in the way assumed, the calculation may differ.

Outcome

On the stated facts, and assuming each co-owner is responsible for half of the mortgage, the likely SDLT consideration is £223,500 made up of:

• £80,000 cash; plus
• £143,500 mortgage debt taken over

That means no SDLT would be payable if the applicable nil-rate threshold is £250,000.

The practical takeaway is that SDLT is based on what the remaining owner gives for the other owner’s share, not on the total value of the larger share they end up with after the trust deed is varied.

Practical Steps

If you are dealing with a similar separation or buyout, the sensible steps are:

1. Check the current legal ownership and the declaration of trust.
2. Confirm the exact beneficial share being transferred.
3. Confirm the outstanding mortgage balance at the date of transfer.
4. Establish how the mortgage liability is borne between the parties in substance and in law.
5. Identify all consideration being given, including cash, debt assumption, and any other value passing.
6. Apply the SDLT rates and rules in force on the effective date of the transaction.
7. Consider whether any higher rates, reliefs, or special rules apply.
8. Ensure the conveyancer or tax adviser records clearly how the consideration has been calculated.

If the issue also involves whether the property was uninhabitable or not suitable for use as a dwelling, that is a separate SDLT question. The threshold for showing a property was not suitable for use is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Conclusion

Where one co-owner acquires the other’s share after a separation, SDLT is usually charged on the consideration given for that transfer, including any mortgage debt taken over. On the figures discussed here, that points to chargeable consideration of £223,500 and no SDLT liability, assuming equal mortgage responsibility and the residential nil-rate threshold of £250,000.

Legal References Used

• Finance Act 2003
• Stamp Duty Land Tax rules on chargeable consideration
• Stamp Duty Land Tax treatment of assumed mortgage debt
• 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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