Stamp duty remortgage confusion

A reader from Greater Manchester is trying to take his mother off his mortgage but is concerned he may face Stamp Duty Land Tax (SDLT).

Robin Marcus, director of the UK’s largest online conveyancer www.easier2move.com offers a helping hand.

Maulik from Ashton Under Lyne asks:

I have a question relating to the Stamp Duty Land Tax (SDLT).

We are trying to remortgage our property. There are three names on my current property: my wife and my mother as well as me. However, two years ago, my mother died.

We need to remove her name from the mortgage deed. However, this seems to be a case of 'transfer of equity'.

We received a letter from a lawyer's firm, stating that "we may have to pay the SLDT". Our Property value is around £310,000 (max).

Do we have to pay the SDLT if we remove my mother's name from the mortgage deed?

Robin from www.easier2move.com responds:

Unfortunately, Stamp Duty Land Tax (SDLT) is not only payable on purchase of a property but also on the 'transfer of equity'.

This would apply to your situation where a property in multiple names is being transferred into joint ownership.

The general rule is that SDLT is payable if the amount of any payment from one party to the other together with half of any outstanding mortgage exceeds £125,000 (the lowest SDLT threshold).

For example, if a property worth £300,000 with an existing mortgage of £200,000 is transferred from two names into one with a payment being made of £50,000 (half the equity) and the mortgage being transferred with the property, SDLT would be payable. A total of £1,500 would be due which is one per cent of half the mortgage debt (£200,000) plus the amount of the payment (£50,000).

As with purchases, the rate of SDLT will increase if the taxable amount is above £250,000 (three per cent) or £500,000 (four per cent).

Using this formula from the information you have given us, it would appear that no payment would need to be made for the one third share to be transferred and therefore no SDLT will be payable unless the property is subject to a mortgage in excess of £375,000.

Anyone about to embark upon a transfer of equity should consider at the outset the effect of any payment of SDLT so the cost doesn’t come as an unpleasant surprise at a point when it is too late to withdraw from or renegotiate the transaction.

If you have a question for Robin or one of our team of experts go to the myfinances.co.uk Ask the Mortgage Expert section.

For more information on the issues discussed here, go to www.easier2move.com.