Do you pay SDLT if a parent gifts a house and you later buy out your siblings?

Introduction

This is a common Stamp Duty Land Tax (SDLT) question in family property arrangements. A parent may want to transfer a home to one child, and that child may later raise a mortgage to pay other family members for their shares or expectations. The SDLT result depends on one key issue: whether there is any chargeable consideration at the time of the transfer.

It is also important to separate the stages properly. A pure gift can be treated very differently from a later payment to other family members. If the steps are mixed together, the SDLT position can become more complicated.

The Question

A person lives in a house owned by a parent. The parent intends to transfer the property into that person’s sole name. At the time of the transfer, there will be no payment and no mortgage or other debt taken over. After the transfer, the recipient plans to take out a mortgage on the property and use the funds to buy out siblings.

The recipient has never owned a home to live in personally, but already owns three buy-to-let properties. The property is worth about £400,000. The question is:

• is SDLT due on the initial transfer from the parent, and
• what happens for SDLT when the siblings are later bought out?

Nick’s Explanation

Nick’s view was that the initial transfer would not trigger SDLT if it is a genuine gift with no consideration. In anonymised terms, his reasoning was:

“If the property is transferred outright for no payment, and no mortgage or other debt is taken on as part of that transfer, there is no chargeable consideration and therefore no SDLT on that initial transfer.”

He also explained that a later mortgage raised after the recipient already owns the property is normally just financing. It is not, by itself, a land transaction that creates SDLT.

On the later buyout, Nick explained that SDLT would apply to the amount actually paid to acquire the relevant interest. Because the buyer already owns other dwellings, the higher rates for additional dwellings would apply to that later chargeable transaction.

He also gave an illustration based on £400,000 of chargeable consideration. On that assumption, he calculated SDLT at £27,500 using the residential rates then in force plus the 5% surcharge for additional dwellings.

The Law

SDLT is charged under Part 4 of the Finance Act 2003.

• Section 49 Finance Act 2003 provides that SDLT applies to a “chargeable transaction”.
• Paragraph 1 of Schedule 3 Finance Act 2003 exempts a transaction where there is no chargeable consideration.
• Section 50 Finance Act 2003 and Schedule 4 Finance Act 2003 deal with what counts as chargeable consideration.
• Schedule 4ZA Finance Act 2003 contains the higher rates for additional dwellings.

In simple terms, SDLT usually depends on what is given in return for the land transaction. That can include:

• cash paid,
• debt taken over, including mortgage debt, or
• other forms of consideration linked to the transfer.

If nothing is given in return, the transaction may fall within the no-chargeable-consideration exemption.

Analysis

The SDLT position is best analysed in stages.

First, look at the transfer from the parent to the child. If the property is transferred as a genuine gift, with:

• no money paid,
• no existing mortgage taken over, and
• no legally binding obligation to make a later payment as part of that transfer,

then there is no chargeable consideration. On those facts, paragraph 1 of Schedule 3 can apply, so no SDLT is due on the initial transfer.

Second, look at the later mortgage. If the recipient already owns the property and then separately borrows against it, that borrowing is usually just a financing step. It does not itself amount to a chargeable land transaction. So the later mortgage, on its own, does not create SDLT.

Third, look at the later buyout of the siblings. If the recipient later pays money to acquire an interest in the property, or to perfect title in a way that amounts to chargeable consideration for a land transaction, that later step can attract SDLT. The tax is charged on the amount of chargeable consideration for that later acquisition, not automatically on the whole market value of the property.

That point is important. If the amount paid to the siblings is less than £400,000, the SDLT calculation would usually be based on that lower amount. If the amount paid is £400,000, then the calculation would be based on £400,000.

Fourth, the higher rates for additional dwellings need to be considered. Because the buyer already owns three buy-to-let properties, the Schedule 4ZA surcharge would generally apply to a later chargeable acquisition of a dwelling interest, unless a specific exception applied. On the facts given, no such exception appears to apply.

Using the rates referred to in Nick’s explanation, if the later chargeable consideration is £400,000, the SDLT would be:

• 0% on the first £250,000 = £0
• 5% on the next £150,000 = £7,500
• plus the 5% higher-rates surcharge on the full £400,000 = £20,000

Total SDLT = £27,500.

That said, the exact legal structure matters. In some family arrangements, the siblings may not actually hold a legal or beneficial interest capable of being transferred. In others, they may do so. The SDLT analysis must follow the real legal interests being acquired and the actual consideration given.

It is also essential that the initial gift is not merely one part of a pre-arranged single bargain under which consideration is effectively being given for the transfer. If the documents or facts show that the transfer is conditional on later payment, HMRC may argue that there was chargeable consideration from the outset.

Outcome

On the facts described:

• no SDLT should arise on the initial transfer from the parent if it is a genuine gift with no payment and no debt assumed,
• a later mortgage raised after ownership has already passed should not by itself trigger SDLT, and
• SDLT is likely to arise when money is later paid to acquire the relevant interest from the siblings, with the higher rates for additional dwellings applying.

If the later chargeable consideration is £400,000, the figure given in Nick’s explanation is £27,500.

Practical Steps

• Ask the conveyancer to record clearly that the initial transfer is for no consideration.
• Check carefully that no mortgage is being assumed on the initial transfer.
• Make sure there is no side agreement showing that the gift is conditional on later payment.
• Identify exactly what legal or beneficial interest, if any, the siblings hold and what is being acquired from them later.
• Calculate SDLT on the actual amount paid in the later transaction, not simply the property value unless that is the true chargeable consideration.
• Check the higher rates for additional dwellings under Schedule 4ZA, because owning other residential properties will usually increase the SDLT bill.
• Keep a clear paper trail showing the timing and legal basis of each separate step.

Conclusion

A pure gift of a house from a parent to a child can be free of SDLT if there is no chargeable consideration at the time of transfer. A later mortgage does not usually change that. But if the child later pays siblings to acquire a property interest, that later step can attract SDLT, and the higher rates for additional dwellings are likely to apply where the buyer already owns other residential properties.

Legal References Used

• Finance Act 2003, section 49
• Finance Act 2003, section 50
• Finance Act 2003, Schedule 3, paragraph 1
• Finance Act 2003, Schedule 4
• Finance Act 2003, Schedule 4ZA

This page was last updated on 22 March 2026.

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