SDLT on Gifted Property 2026

A pure gift of an unencumbered property: no SDLT. An assumed mortgage: SDLT on the mortgage balance under Schedule 4 FA 2003. Plus CGT and IHT consequences for the giver to think about.

The core rule: no consideration, no SDLT

Under section 49 of the Finance Act 2003, SDLT applies only where there is chargeable consideration. A pure gift of property between living individuals - where the giver transfers title to the recipient with nothing moving back to the giver - involves no chargeable consideration and therefore no SDLT. The transfer is documented by a deed of gift (also called a voluntary transfer or transfer for no consideration) and registered at HM Land Registry as a no-consideration transfer.

The classic example is a parent gifting their main residence to an adult child, with no expectation of repayment and no mortgage on the property. No SDLT for the child, regardless of the property value. A £2 million house gifted free of any mortgage and any back-consideration carries the same zero SDLT result as a £150,000 house.

HMRC's SDLT Manual at SDLTM04020 confirms the treatment of gifts. The Land Registry forms (TR1 with the certificate-of-value box completed showing “no consideration”) and an SDLT return is normally not required where the consideration is genuinely nil. If a return is filed, the certificate-of-value box can be ticked confirming the transaction is below the SDLT threshold.

The assumed-mortgage exception

The critical SDLT trap is where the recipient assumes an outstanding mortgage as part of the gift. Under paragraph 8 of Schedule 4 FA 2003, the outstanding mortgage balance is treated as chargeable consideration moving from the recipient to the giver. The reasoning is that the recipient is taking over a debt obligation that the giver previously bore, which is economically equivalent to paying the giver that amount.

Worked example: parents own a £600,000 house with a £200,000 mortgage. They want to gift the house to their adult child, with the child taking over the mortgage. The chargeable consideration is £200,000. Standard SDLT is £1,500 (£0 on £125k + 2% on £75k). If the child already owns another residential dwelling worth £40k+, the 5% surcharge applies, taking the SDLT to £11,500. Plus the parents have a deemed CGT disposal at market value (£600,000) potentially triggering CGT if the house is not their main residence.

The mortgage-assumption rule applies whether the lender formally consents to the change of borrower or whether the recipient continues to pay the mortgage in the giver's name (substance over form). The position is the same whether the assumed mortgage is a full mortgage, a remortgage by the recipient at completion, or a continuation of the existing facility. To avoid the SDLT consequence, the simplest path is for the giver to repay the mortgage in full before the gift, perhaps by remortgaging another asset or using savings, so that the gifted property is genuinely unencumbered.

The wider tax picture: CGT and IHT

SDLT is rarely the most expensive tax in a gift-of-property transaction. The giver typically faces a Capital Gains Tax liability under section 17 of the Taxation of Chargeable Gains Act 1992, which deems gifts between connected persons to be made at market value. If the property is not the giver's main residence (so Private Residence Relief is not available) and there is a gain since acquisition, the giver pays CGT at 24% (higher-rate) or 18% (basic-rate) on the residential gain from 30 October 2024.

Inheritance Tax is the other consideration. A lifetime gift between living individuals is a Potentially Exempt Transfer (PET) under section 3A of the Inheritance Tax Act 1984. If the giver survives 7 years from the date of the gift, the PET becomes fully IHT-exempt. If the giver dies within 7 years, the gift becomes a chargeable transfer with taper relief reducing the IHT charge between years 3 and 7. The seven-year clock starts on the date of the gift; this is a key reason for not delaying intended gifts of property.

For a parent gifting their main residence to an adult child while continuing to live there, the IHT “Gift With Reservation of Benefit” rules in section 102 of the Finance Act 1986 typically apply, treating the property as if it had never been gifted for IHT purposes. To escape the GWR, the parent must either move out completely or pay a market rent to the child (which the child then pays income tax on). The GWR rules are a major reason why straightforward gifts of residence between parents and children rarely achieve the IHT outcome intended without careful structuring.

Worked examples by scenario

The £40,000 minimum threshold for the additional-dwellings surcharge means very small gifted shares with small mortgages (below £40k assumed mortgage) escape the surcharge entirely. Above £40k assumed mortgage, the surcharge bites on every band including the nil-rate.

The Bank of Mum and Dad scenario

A very common scenario is parents providing financial help to a child buying their first home. Three main structures are used, each with different SDLT consequences. Structure A: parents gift cash to the child, child uses the cash as deposit, child takes title alone. SDLT outcome: child pays standard or FTB SDLT on the actual purchase price; no SDLT on the cash gift; FTB status preserved if it would otherwise apply.

Structure B: parents go on the title alongside the child as joint owners (typically because the lender requires it for affordability). SDLT outcome: if parents already own a home, the 5% additional-dwellings surcharge applies to the whole purchase price (not just the parents' share), because at least one named buyer owns another dwelling. FTB relief is lost (parents are not first-time buyers). Outcome: substantial SDLT penalty versus Structure A. Most lenders now offer Joint Borrower Sole Proprietor (JBSP) mortgages to avoid this trap, with parents on the mortgage but not on the title.

Structure C: parents buy the property in their own name and rent it to the child, or hold beneficial interest under a declaration of trust. SDLT outcome: parents pay the 5% additional-dwellings surcharge on the full price; child pays no SDLT and is not a buyer. Future implications include CGT, IHT, and the eventual transfer to the child triggering further SDLT consequences. For most family help, Structures A or B (with JBSP) are simpler and cheaper than Structure C.

Documentation and the audit trail

A gift of property must be documented by a Deed of Gift (or a Transfer for Nil Consideration on Form TR1 with the appropriate certificate-of-value box ticked). Even where no SDLT is due, the recipient's solicitor will normally file an SDLT return marking it as below the notification threshold, to put HMRC on notice of the transaction and start the enquiry-window clock running.

Where the gift involves an assumed mortgage, the SDLT return must be filed within 14 days of completion, with the chargeable consideration set out clearly. Late filing attracts a £100 fixed penalty (rising to £200 after 3 months) plus daily interest under paragraph 23 of Schedule 10 FA 2003. The risk of forgetting to file a return on a gift-with-mortgage transaction is real because many family transactions are handled informally without specialist SDLT advice.

Frequently Asked Questions

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