Do You Pay Stamp Duty When Remortgaging?

Stamp Duty and Remortgaging: The Basic Rule

Stamp Duty Land Tax (SDLT) in England and Northern Ireland, Land Transaction Tax (LTT) in Wales, and Land and Buildings Transaction Tax (LBTT) in Scotland are all taxes on property purchases. The key word here is "purchases" -- these taxes apply when you buy a property, not when you change your mortgage.

When you remortgage, you're simply switching your loan from one lender to another (or to a new deal with the same lender). The ownership of the property doesn't change, so there's no property transaction for stamp duty purposes.

This applies whether you're remortgaging to a new lender, doing a product transfer with your existing lender, or even borrowing more against your property. As long as the property ownership remains the same, no stamp duty is payable.

When Stamp Duty Might Apply

There are a few specific situations where stamp duty could become relevant alongside a remortgage. The most common is when you remortgage as part of a transfer of equity, which means adding or removing someone from the property's title deeds.

For example, if you're buying out an ex-partner's share of the property as part of a separation, you may need to pay stamp duty on the value of the share being transferred to you. This would be calculated on the portion of the property value (including any mortgage debt) that's changing hands.

Similarly, if you're adding a partner to your property title and they're taking on a share of the mortgage debt, this could be treated as a chargeable transaction if the share of the debt exceeds the relevant stamp duty threshold. These situations are complex and you should take legal advice before proceeding.

Transfer of Equity and Stamp Duty

A transfer of equity is the legal process of adding or removing someone from the ownership of a property. When this happens alongside a remortgage, stamp duty may be payable depending on the circumstances and the value involved.

If you're transferring a share of your property to a spouse or civil partner as part of the normal arrangement of your affairs (not as part of a divorce or separation order), this is usually exempt from stamp duty. However, transfers between unmarried partners, family members or friends can trigger a stamp duty liability.

The amount of stamp duty payable on a transfer of equity is calculated on the "chargeable consideration," which includes the share of any outstanding mortgage being taken on by the new owner. If this figure exceeds the stamp duty threshold, tax will be due. Given the complexity, professional legal advice is essential in these situations.

Scotland and Wales: Different Rules

If your property is in Scotland, the equivalent tax is Land and Buildings Transaction Tax (LBTT). The same principle applies: a straightforward remortgage doesn't trigger LBTT. However, transfers of equity and other changes in ownership may attract the tax, with different thresholds and rates than those in England.

In Wales, Land Transaction Tax (LTT) replaced stamp duty in April 2018. Again, standard remortgages are not subject to LTT, but property transfers and changes in beneficial ownership can be chargeable. The rates and thresholds differ from both England and Scotland.

If you're dealing with a property transaction alongside your remortgage in Scotland or Wales, make sure your solicitor is experienced in the local tax rules, as the differences between the three systems can be significant.