A pure gift of property is free of Stamp Duty Land Tax because there is no chargeable consideration, but if the person receiving it takes on, or becomes jointly liable for, a mortgage secured on the property, the debt they assume is treated as the price. Where only a share is given, the debt is apportioned by ownership share, so a half share in a house with a £300,000 mortgage carries £150,000 of chargeable consideration.

Why is taking over a mortgage treated as paying for the property?

SDLT is charged on chargeable consideration, meaning anything given in money or money’s worth for the property. Paragraph 8(1) of Schedule 4 to the Finance Act 2003 includes two kinds of debt:

  • the satisfaction or release of a debt owed by the seller, or due to the buyer
  • the assumption of existing debt by the buyer

In economic terms, someone who takes over a £200,000 mortgage on a property worth £350,000 has paid £200,000 for it, even if no cash moves. GOV.UK’s list of chargeable consideration therefore includes release from a debt and transfer of a debt, including the value of any outstanding mortgage.

“Existing debt” means debt created before the transfer and not in connection with it, and the amount includes any interest accrued by the effective date (paragraph 8(3)). Paying off the giver’s mortgage on their behalf is caught too, as the satisfaction of a debt owed by the seller.

What counts as assuming the debt?

The recipient does not need to sign a new loan. Paragraph 8(1A) says that where a debt is secured on the property immediately before and after the transfer, and the rights or liabilities of any party in relation to that debt change, there is an assumption of the debt. HMRC’s manual at SDLTM04040 says this includes:

  • the recipient giving the lender a personal covenant
  • the giver being released from their personal covenant
  • the recipient agreeing to indemnify the giver

If the mortgage stays entirely in the giver’s name, with no release and no indemnity, the rights and liabilities have not changed and the transfer can remain a gift. In practice lenders often require any new owner to join the mortgage, which is what triggers the charge.

How much of the mortgage counts when only a share is given?

Paragraph 8(1B) prevents a joint owner being taxed on the whole debt just because joint borrowers are usually jointly and severally liable. Each owner is treated as owing a proportion of the debt equal to their undivided share of the property before and after the transfer. Under paragraph 8(1C) joint tenants are treated as holding equal shares.

HMRC’s examples at SDLTM04040a show how this works:

  • A sole owner transfers into joint names in equal shares. The new owner is treated as assuming 50% of the debt.
  • Owners holding 70:30 transfer to the 30% owner alone. That owner is treated as assuming 70% of the debt, the difference between the 30% owed before and 100% after.

Paragraph 8(2) caps the chargeable consideration at the market value of what is transferred, so a gift of a property in negative equity is never taxed on more than it is worth.

What does this look like in practice?

Illustration only. Using the 2026 to 2027 residential rates, in force since 1 April 2025.

Situation Debt assumed Standard rates Higher rates
Parent adds adult child to title as 50% owner, £120,000 mortgage £60,000 £0 £3,000
Owner transfers half share to unmarried partner, £300,000 mortgage £150,000 £500 £8,000

In the first case there is no tax at the standard rates, but a return is still needed because the consideration is £40,000 or more. If the child already owns a flat, the higher rates apply: 5% of £60,000 is £3,000. In the second case the partner pays 2% on the £25,000 above £125,000, or £500, unless they own another residential property, when the higher rates give £6,250 plus 7% of £25,000, a total of £8,000.

When do the higher rates apply?

The person receiving the share is the buyer. If, at the end of the day of the transfer, they will own more than one residential property worth £40,000 or more and are not replacing their main home, the higher rates apply to the debt assumed. Three exceptions are worth checking:

  • Spouses and civil partners living together: paragraph 9A of Schedule 4ZA takes a transfer between them out of the higher rates. See SDLT between spouses and on divorce.
  • Increasing an existing share: under paragraph 7A, GOV.UK confirms the higher rates do not apply where the buyer already owns 25% or more and the property has been their only or main home for the previous three years.
  • A replacement main residence: if the recipient is moving in and has sold their previous main home, the usual replacement rules apply.

Which transfers with a mortgage are exempt anyway?

Some transfers are exempt even though debt moves:

  • Inheritance: under paragraph 3A of Schedule 3, a beneficiary who receives property under a will or intestacy is exempt even if they take on debt secured on it at the date of death. GOV.UK confirms property left in a will is almost always exempt, including where there is an outstanding mortgage.
  • Divorce and dissolution: transfers between the spouses or civil partners under a court order or connected agreement are exempt under paragraphs 3 and 3A of Schedule 3.

Gifts to a company work the other way. If the company is connected with the giver, section 53 treats the consideration as at least market value and switches off the no consideration exemption, so a gift of a mortgage free house to your own company is still taxed on its full value. See connected persons for tax.

What else does the giver need to consider?

SDLT is only one tax. For Capital Gains Tax a gift is normally valued at market value, and for Inheritance Tax a gift of a home is only fully outside the estate if the giver survives seven years and does not keep benefiting from it, otherwise it can be a gift with reservation. These are covered in gifting property to children, and the possible deferral in gift holdover relief. If the property is let, the new ownership split also affects how rental profits are taxed, see jointly owned rental property.

What mistakes do people make?

  • Assuming that because no money changed hands there is nothing to report.
  • Taxing the recipient on the whole mortgage rather than the share acquired.
  • Forgetting the higher rates where the recipient already owns a home.
  • Missing that paying off the giver’s loan is consideration.
  • Filing late: the return and any tax are due within 14 days of the effective date.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.