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  • Stamp Duty

    By Guest on 21st Jul 2016

    If transfer of equity takes place on two properties each jointly owned by 'tenants on common' who wish to each own one of the properties individually, what is the rate of stamp duty payable IF it is necessary for a settlement to be paid by one of the owners to the other of more than £40,000?

  • 1 Answers

    By Guest on 21/07/2016

    Firstly, you will each pay stamp duty in respect of the properties you end up wholly owning. The amount you pay depends on the "chargeable consideration", which for each property will be made up of the following:

    Any cash the remaining owner pays to the outgoing owner;
    Half of the mortgage debt outstanding (if any) on the property; and
    The value of the 50% share in the property you are coming off the title of

    To explain the last point, if for example no money changes hands and there is no mortgage on either property and each property is worth, say, £300,000 then the chargeable consideration for both transactions will be £150,000 because owner A is giving owner B his 50% share in the jointly owned property (the share being worth £150,000) in exchange for owner B's share in the other jointly owned property, and vice versa. If money changes hands as well this will be added to the £150,000 chargeable consideration and if there is an outstanding mortgage debt then duty is paid on half of this debt. So for example:

    Property A is worth £300,000;
    Property B is worth £300,000;
    Owner B gives Owner A his half share in property A in return for Owner A's half share in property B;
    The consideration paid by owner A for the remaining half share in property A is £150,000 plus
    Owner A gives Owner B £50,000 - this increases the chargeable consideration to £200,000 plus
    There is an outstanding mortgage debt on property A in the sum of £50,000. Owner A is already responsible for half this debt but assumes responsibility for the other half. This increases the chargeable consideration by £25,000 to £225,000.

    So the duty payable by Owner A is:
    0% on the first £125,000; and
    2% on the remaining £100,000;

    so a total of £2,000.

    In addition, if either party at the end of the transactions will own 2 or more properties (i.e. they currently own properties other than Property A and Property B) then the higher rate of stamp duty will be payable which means a further 3% on the whole of the chargeable consideration, so in the above example this would be an additional £6,750 bringing the total to £8750

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