What Is a Transfer of Equity?
A transfer of equity changes who is registered as the legal owner of a property at HM Land Registry. Unlike a conveyance (a full sale), a transfer of equity typically involves keeping at least one existing owner on the title. Common examples include: adding a new partner or spouse to the title, removing a departing partner after separation, transferring a share to children, or changing the proportions in which co-owners hold the property.
The process is handled by a conveyancing solicitor and results in a new Land Registry entry reflecting the changed ownership. Most transfers take 4–8 weeks to complete.
When Is Equity Transfer Used?
- ▸Marriage or cohabitation: Adding a new partner to the property title gives them legal co-ownership and associated rights under the Land Registration Act 2002
- ▸Separation or divorce: One partner buys out the other's share (or one party is removed from the title as part of a financial settlement). Mortgage lenders must consent to any change in borrower names
- ▸Gifting to children: Parents sometimes transfer equity (or full ownership) to adult children, often for IHT planning purposes. Note the gift with reservation rules if parents continue to occupy
- ▸Changing ownership structure: Changing from joint tenancy to tenants in common (or vice versa), or adjusting the percentage shares held by co-owners
Stamp Duty Land Tax on Equity Transfer
SDLT is charged on the 'chargeable consideration' — in a transfer of equity, this is the amount paid by the incoming owner for their share, plus any mortgage liability they take on. If there is no payment and no mortgage, there may be no SDLT to pay.
However, if the property has a mortgage and the incoming co-owner takes on responsibility for half the mortgage debt, SDLT is calculated on that half-share of the mortgage. For example: a property worth £400,000 with a £200,000 mortgage. One partner transfers a 50% share to the other. The consideration is £100,000 (50% of £200,000 mortgage). SDLT is calculated on £100,000 at current rates. This calculation catches many people by surprise.
Capital Gains Tax on Equity Transfer
A transfer of equity is a disposal for Capital Gains Tax purposes — the transferor is treated as selling their share at market value, even if no money changes hands. If the property is your main residence and has been throughout your ownership, Private Residence Relief should cover the gain.
If the property being transferred is a second home, buy-to-let, or has not always been your main residence, CGT may be due on the gain at the time of transfer. Transfers between spouses and civil partners are CGT-exempt — the gain is deferred until the recipient eventually disposes of the property.
Mortgage Lender Consent
If the property has a mortgage, the lender must consent to any change in the registered owners. When adding a person to the title, the lender will assess the new co-owner's financial position and may require a full mortgage application. When removing a person, the lender must be satisfied that the remaining owner can service the mortgage alone — this is called a transfer of mortgage.
Some lenders treat a change in borrowers as a new mortgage application subject to full underwriting. Others will process it as a consent application with less scrutiny. It is important to contact the lender at the outset — completing a transfer of equity without lender consent is a breach of the mortgage terms.
Frequently Asked Questions
How long does a transfer of equity take? Typically 4–8 weeks from instruction to registration, assuming no mortgage complications. If the lender requires a full application, add 4–8 weeks for that process. Most straightforward transfers between spouses or civil partners with no change in mortgage take 4–6 weeks.
How much does a transfer of equity cost? Solicitor fees for a straightforward transfer are typically £500–£1,500 plus disbursements (Land Registry registration fee of £20–£500 depending on property value, and any SDLT if applicable). The total cost varies depending on complexity and whether a mortgage re-application is required.
Can I transfer equity to avoid inheritance tax? Yes — transferring ownership to children is a legitimate IHT planning strategy, but only if you comply with the gift with reservation rules. You must vacate the property or pay market rent; otherwise the property remains in your estate for IHT purposes regardless of who owns it legally.
Does transferring equity affect my credit rating? It depends. If you are removed from the mortgage as well as the title, your credit file will update to reflect that. If you remain on the mortgage but transfer the equity, you remain responsible for the debt on your credit file.
What is the difference between joint tenants and tenants in common? Joint tenants each own the whole property (no individual share). On death, the property passes automatically to the surviving co-owner by survivorship. Tenants in common each own a defined share (e.g. 50/50 or 60/40) that can be left separately in a will. Unmarried couples and business co-owners should usually hold as tenants in common.
Can I transfer equity without a solicitor? Technically possible as Land Registry accepts DIY transfers, but it is not recommended. The process involves legal forms, lender consent, potential SDLT liability, and Land Registration requirements. Errors are costly to correct and mortgage lenders almost always require professional legal representation.
Key Takeaways
- ✓A transfer of equity changes the legal ownership at Land Registry — adding, removing, or adjusting co-owners' shares
- ✓SDLT may be due on the mortgage consideration even when no money changes hands between parties
- ✓Transfers between spouses and civil partners are both SDLT-exempt and CGT-exempt
- ✓Mortgage lender consent is required before any transfer — contact the lender at the outset
- ✓Transferring property to children for IHT purposes is only effective if you comply with the gift with reservation rules