Do you pay SDLT if you transfer a flat to your own company before buying a home with a first-time buyer?

Introduction

This is a common Stamp Duty Land Tax (SDLT) question. A person already owns a flat, plans to move it into a company they control, and then wants to buy a new home jointly with a partner who has never owned property before. The key issues are whether SDLT is payable on the transfer to the company, whether the higher rates for additional dwellings apply on the new purchase, and whether first-time buyer relief is available to the other buyer.

The Question

A buyer owns an existing flat worth about £185,000. They plan to transfer that flat to a company of which they will be the director and shareholder. They then intend to buy a new home for about £325,000 with their partner, with the purchase and mortgage split equally. The partner is a first-time buyer.

The practical questions are:

• Is SDLT due when the flat is transferred to the company?
• What SDLT is due on the purchase of the new home if the flat is transferred first?
• What changes if the buyer still owns the flat personally when the new home is bought?

Nick’s Explanation

Nick’s core explanation was that a transfer of a dwelling to a connected company is not ignored for SDLT. In broad terms, the company is treated as acquiring the property at market value, even if no cash is actually paid.

He explained the position in two scenarios.

First, if the flat is transferred to the company before the new home is bought, the company would generally pay SDLT on the market value of the flat. On the figures given, that would be calculated by reference to £185,000. He also explained that, if the original owner no longer owns another dwelling at the time of the new purchase, the 5% higher rates surcharge on an additional dwelling would not apply to that person’s share of the new home.

Second, if the flat is still owned personally when the new home is bought, the buyer would usually be treated as already owning another dwelling. That means the higher rates for additional dwellings would apply to their share of the purchase. He also noted that first-time buyer relief would not be available on a joint purchase unless all buyers are first-time buyers.

The Law

SDLT is charged under the Finance Act 2003.

For a transfer of land to a company connected with the transferor, the market value rule is important. Broadly, where a person transfers property to their own company, SDLT is generally calculated by reference to market value rather than the amount actually paid. That means SDLT can arise even on a transfer for no consideration or for less than full value.

Where the purchaser is a company acquiring a residential property, special SDLT charging rules apply. For lower-value residential acquisitions, the company does not benefit from ordinary individual treatment in the same way as a private buyer buying a home to live in. On the figures discussed here, the company acquisition was treated at a 5% rate, giving SDLT of £9,250 on a market value of £185,000.

On the later purchase of the new home, the higher rates for additional dwellings are relevant. These rules apply if, at the end of the effective date of the transaction, a buyer owns a major interest in another dwelling and the replacement of a main residence rules do not remove the surcharge.

First-time buyer relief is governed by Schedule 6ZA to the Finance Act 2003. A key condition is that all purchasers must be first-time buyers. If one joint purchaser is not a first-time buyer, the relief is not available for any of them on that transaction.

Analysis

The SDLT analysis is easiest if the two possible timings are separated.

Step 1: Transfer of the flat to the company

If the flat is transferred to a company controlled by the current owner, SDLT is generally charged on market value because the company is connected with that owner. On the facts given, the market value is £185,000. Using the rates applied in Nick’s explanation, the SDLT due from the company would be £9,250.

This point often surprises people because they assume that no SDLT is due if they are simply moving a property into their own company. That is usually wrong. For SDLT, a connected company acquisition is commonly taxed by reference to market value.

Step 2: Buying the new home after the transfer

If the flat has already been transferred and the buyer no longer owns it personally when the new home is purchased, that buyer may avoid being treated as owning an additional dwelling at the end of the transaction. On that basis, the 5% higher rates surcharge would not apply to that buyer’s share.

On a 50/50 purchase of a £325,000 home, each buyer’s share is £162,500.

For the buyer who previously owned the flat but no longer owns it personally at completion, Nick calculated the SDLT on standard residential rates as:

• 0% on the first £125,000 = £0
• 2% on the remaining £37,500 = £750

Total SDLT on that share: £750.

Step 3: Can the partner claim first-time buyer relief?

If the purchase takes place after the flat has been transferred away, the partner may qualify for first-time buyer relief, assuming the statutory conditions in Schedule 6ZA are met. Those conditions include that the buyer has never previously held a major interest in a dwelling and intends to occupy the property as their only or main residence. On the figures given, Nick treated the partner’s SDLT as nil.

Step 4: What if the flat is still owned personally when the new home is bought?

If the original buyer still owns the flat personally at completion of the new purchase, they will generally be acquiring an additional dwelling. That means the 5% higher rates surcharge applies to their share.

Using Nick’s figures for that buyer’s £162,500 share:

• Standard SDLT: 0% on £125,000 = £0
• Standard SDLT: 2% on £37,500 = £750
• Higher rates surcharge: 5% on £162,500 = £8,125

Total SDLT on that share: £8,875.

Step 5: What happens to the partner’s first-time buyer relief in that case?

It is lost. Schedule 6ZA requires all purchasers to be first-time buyers. If one joint buyer already owns or has owned residential property, the relief is not available for the transaction. So the partner would pay SDLT at standard residential rates on their £162,500 share, which Nick calculated as £750.

Step 6: Why timing matters

The overall SDLT cost can differ significantly depending on whether the existing flat is still in personal ownership at the time the new home is bought. The transfer to the company itself creates an SDLT cost, but it may prevent the higher rates surcharge from applying on the new purchase. The exact result depends on the full facts, including ownership position at completion and whether all conditions for reliefs are met.

Outcome

On the figures and assumptions used in Nick’s explanation:

• If the flat is transferred to the company before the new home is bought, the company would pay SDLT of £9,250 on the transfer, and the buyer’s SDLT on the new home would be £750. The partner may be able to claim first-time buyer relief, giving SDLT of £0 on their share.
• If the flat is still owned personally when the new home is bought, the buyer’s share of the new purchase would attract the 5% higher rates surcharge, producing SDLT of £8,875 on that share. The partner would also lose first-time buyer relief and would pay £750 on their share.

The main practical point is that transferring a flat to a connected company is not SDLT-free, but ownership at the time of the new purchase can determine whether the higher rates apply and whether first-time buyer relief survives.

Practical Steps

• Confirm exactly who will own the existing flat at the effective date of the new purchase.
• Check whether the transfer to the company is definitely a transfer to a connected company, which usually triggers market value treatment.
• Calculate SDLT separately for the company acquisition and the new home purchase.
• Review whether the partner satisfies all conditions in Schedule 6ZA to the Finance Act 2003.
• Check whether any replacement of main residence rules could affect the higher rates analysis on the full facts.
• Make sure the SDLT return reflects the correct ownership structure and relief position at completion.

Conclusion

If you transfer a flat to your own company, SDLT is usually payable by the company on market value. If that transfer happens before you buy a new home, you may avoid the higher rates surcharge on your share of the new purchase. If you still own the flat personally when you buy the new home, the surcharge is likely to apply and your joint buyer will usually lose first-time buyer relief.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 6ZA
• Rules on SDLT market value treatment for connected company transactions under the Finance Act 2003
• Rules on higher rates for additional dwellings under the Finance Act 2003

This page was last updated on 22 March 2026.

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