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Can I Put My Home in a Trust Without Paying SDLT?

Can I Put My Home in a Trust Without Paying SDLT?

Can I Put My Home in a Trust Without Paying SDLT?

Sometimes you can put your home in a trust without paying SDLT. This article breaks down when SDLT kicks in for trusts, what exemptions might be available, and how to transfer your property without breaking the bank. Plus, we’ll be answering the big question : can I put my home in a trust without shelling out for SDLT?

Key Takeaways

  • SDLT is a tax on property purchases above a certain price – and its rates vary depending on who’s buying and what type of property’s being sold.
  • Transferring your home into a trust – bare, discretionary or life interest – might incur SDLT costs, especially if there’s a mortgage or financial consideration involved.
  • Getting your head around the rules, costs, and exemptions when putting your property in a trust is crucial for sound financial planning and avoiding nasty tax surprises.

Understanding Stamp Duty Land Tax (SDLT)

SDLT is a tax you pay when you buy a property that’s over a certain price in England and Northern Ireland and it applies to both homes and offices. The point of SDLT is to make money out of land deals, so it’s a key thing to consider when buying or selling a property – the tax can add up and surprise you in a big way.

Whether you’re a first-time buyer or a seasoned homeowner looking to put your property in a trust, getting the lowdown on SDLT is essential. The rates vary depending on all sorts of factors like who’s buying and how much the property costs. Knowing when and how SDLT is payable can save you a heap of trouble and money down the line.

What is SDLT?

SDLT is a tricky tax that comes into play when you buy a property. Key things to note are:

  • The basic threshold for SDLT on homes is currently £125,000.
  • If you buy a home above that price, you’ve got an SDLT bill to pay.
  • SDLT rates go up if you’re buying an extra property or have already got a home of your own.
  • There have been some changes to SDLT rates as of April 2025 – so make sure you’re up to speed to avoid any nasty surprises when buying property.

When is SDLT Payable?

Some key things to know about when SDLT is due and what you need to do:

  • You’ve got 14 days to pay SDLT after you’ve finished buying your property.
  • Don’t miss this deadline – if you do, you’ll be hit with penalties and charges.
  • Along with the payment, you’ll need to fill out an SDLT return with all the details of the deal and get it to HMRC on time.
  • If you mess this up, you could be in for a world of financial trouble.

But, here’s the good news: you might not have to pay SDLT at all, for example, if you’re gifting a property to a trust without any debt attached. Or if you’re buying a property in a Bare Trust, the tax man will treat the beneficiary as the buyer and slap on the surcharge accordingly. Getting a grip on these quirks can help you plan your property moves into trusts with no nasty surprises.

Types of Trusts and Their SDLT Implications

Trusts come in a few different flavours, each with their own take on SDLT. There’s Bare Trust, which gives the beneficiary complete control and the trustee just admin duties. Then there’s Interest in Possession Trust and Discretionary Trust, each with its own set of rules and its own SDLT implications. Getting to grips with the ins and outs of each type is a must for anyone looking to move their property into a trust and avoid any SDLT shocks.

Trusts can be a bit of a minefield, and moving your property into one can bring up all sorts of SDLT headache but there are exemptions available that can reduce or eliminate the tax. For instance, if you inherit a property through a will, you won’t have to pay SDLT. Just remember – to get it right, you need to know the rules and the possible liabilities for each type of trust.

Bare Trusts

Bare trusts are used to give beneficiaries the keys to the property and leave the trustee to do the administrative bits. They’re often used when buying for minors or to pass property on with no strings attached but be aware: transferring your property into a bare trust could still mean you’ll be hit with SDLT. For example, if you buy a property for a bare trust, the beneficiary will be treated as the buyer for SDLT, so make sure you’re ready for that to happen.

For first time buyers, the bare trustee is considered the purchaser of the whole interest – which may well influence the SDLT maths and if the beneficiary is under 18, the parents may be considered as the purchasers too – impacting the SDLT calculation.

Getting a clear view of SDLT obligations when moving property into trusts is crucial even if the legal title changes.

Discretionary Trusts

Discretionary trusts give the people in charge, the trustees, the freedom to decide how the money coming in and the actual money held in the trust are split, without any automatic rights for the people who benefit from the trust. Depending on what the trust is and what the people who are meant to benefit from it can actually do, the SDLT higher rates might still apply. For example, if a trustee goes out and buys a property with no strings attached, then the tax man treats the purchase just like a company made it, which means you get hit with the higher SDLT rates.

If you’re buying a residential property for over 40 grand under a trust. Let that be a discretionary trust or any other type then the following rules apply:

  • SDLT higher rates kick in.
  • Kids who own property through a trust are considered non-beneficiaries for SDLT purposes.
  • Instead, the parents are treated as the beneficiaries for SDLT purposes.

In the case of land, the people buying into an interest in it are treated like they are buying the whole thing, which includes any beneficial interest.

Life Interest Trusts

With a life interest trust, the person who gets to live in the property for the rest of their life is considered the owner for SDLT purposes. The normal SDLT rates get applied to land transactions within life interest trusts, making sure that whoever owns the property gets taxed based on their rights and interest in the property.

Moving Residential Property into a Trust

Transferring residential property into a trust is no easy feat – there are quite a few legal steps that need to be gone through in order to sort it all out. And because it can all get quite complicated, getting your head around the process is crucial for sensible planning. The cost of moving the property over can vary like mad, depending on the complexity of the trust and the property’s value.

Getting a handle on the process and the possible tax implications will help you make informed decisions that won’t leave you out of pocket. This section is going to walk you through the main processes, from getting the right advice to registering the trust and understanding the tax consequences of the transfer.

Legal Steps for Transfer

The very first thing you need to do when transferring property into a trust is to get some proper advice from a qualified solicitor who will help guide you through the whole shebang. Creating a trust deed is a must, as it outlines the rules that govern the trust and its beneficiaries, and this is what gives the trust its legal foundation.

Next, you need to fill out and submit a TR1 transfer form to HM Land Registry to actually transfer the ownership of the property into the trust. And let’s face it, getting the right type of trust and the right documents in place can be a nightmare but a good sdlt expert can help sort that all out.

Registering the Trust

You’ll need to get the trust registered with HMRC so that everyone knows about the tax bits and bobs. Trusts with property need to get registered with HMRC if they have tax obligations, or if the trust was set up after 2017.

And then it’s a question of whether you need to use HMRC’s Trust Registration Service to make sure you’ve got all your ducks in a row for tax and legal purposes.

Considering Tax Implications

SDLT applies when you’re transferring property into a trust if there’s any cash changing hands, or if the trust gets a mortgage. However, if there isn’t any mortgage or cash changing hands, then no SDLT is payable. And of course, getting to grips with these tax implications is vital for any sensible financial planning.

Normal stamp duty applies when buying a property from a trust, and that’s based on how much the trustees are paying. So you’ll need to do some careful thinking to work out what the SDLT rules mean for your specific situation.

Stamp Duty Land Tax Expert who specialise in conveyancing can help sort out the SDLT rules and make sure you’re paying the right amount of tax if any.

Exemptions and Reliefs from SDLT

There are a few exemptions and reliefs from SDLT that can really cut down how much tax you pay when putting a home into a trust. And getting a handle on these reliefs is key to sensible tax planning. For instance, non-UK residents get hit with a 2% surcharge on residential property purchases which affects the SDLT rates on trusts.

The type of trust you’ve got, and the interests of the people who stand to benefit from it, both play a big role in determining whether the higher SDLT rates come into play and that in turn can influence the available reliefs in terms of managing your SDLT liabilities. So understanding when these reliefs kick in can really help you get on top of your SDLT liabilities.

Main Residence Replacement

Some key points about SDLT rates and refunds:

  • If you’re not replacing your main residence, you’ll be looking at higher SDLT rates.
  • But if the beneficiary is treated as the owner, and the new property is replacing their main residence, the higher SDLT rate doesn’t apply.
  • Refunds for SDLT can be claimed if you sell or give away your old main home within three years of buying the new one.

It’s worth noting that refunds can also be requested if the old main home is still on the market due to special circumstances though if it’s not sold or given away within three years, a sale refund won’t be possible. And getting your head around all this can really help you plan your property transfers and manage your SDLT liabilities effectively.

Transfers Between Spouses

Transfers between spouses or civil partners often qualify for SDLT exemptions which is a real bonus. The higher SDLT rates won’t apply as long as no-one else is involved in the transfer.

But you do need to make sure that the transfer meets the necessary criteria – so it’s worth getting the right advice to make sure you get the most out of these exemptions in your specific situation.

Other Potential Reliefs

There might be specific situations or types of trusts that can get you some SDLT relief. For instance, you might be able to get a refund of SDLT if you buy a new home after January 1st 2017 and are unable to sell your previous home within three years due to something exceptional.

Getting a handle on these reliefs can really help with planning the transfer of a house into a trust.

Costs Involved in Transferring A House into a Trust

Understanding the costs of moving property into a trust is key to sound financial planning and avoiding nasty surprises. The costs can vary wildly depending on how complicated the trust arrangement is and how much the property is worth. These expenses include legal fees, administrative costs, and other charges like Land Registry fees and potentially SDLT.

Knowing what these costs are going to be will allow you to budget properly and make the whole process much smoother. Breaking down the main expenses involved will help you plan more effectively and avoid any unexpected financial burdens.

Legal Fees

Legal fees for setting up a trust can range from £750 to over £5,000 depending on how complicated things get. And with more intricate setups, those costs can quickly spiral out of control. Legal fees cover the creation of trust deeds, getting advice, and preparing all the necessary documents to make sure the trust is set up correctly and is compliant with the law.

Administrative Costs

Ongoing administrative expenses for running a trust will typically include trustee fees and other costs associated with trust management. These expenses come out to a few hundred pounds per year and are necessary to keep the trust running smoothly and up to scratch.

Additional Charges

Other charges like Land Registry fees, which come in at £80 to £500, and potential SDLT costs are also important things to consider when making a land transaction. These charges can quickly add up, especially when dealing with high-value properties, and might incur an extra bill.

Being aware of these potential expenses will help you plan and manage the financial side of things when it comes to property transfers and assets.

Risks and Considerations

Putting your property into a trust comes with its own set of risks and considerations that really need to be carefully weighed up. These include sticking with ongoing costs for managing the trust, worrying about changes to tax law, and the risk of disputes between trustees or beneficiaries. Careful planning and getting some professional advice on the way can really help mitigate these risks and make the trust run smoothly.

Understanding the potential downsides and planning accordingly can really help you make informed decisions about moving property into a trust. Exploring the key risks and considerations will give you a better idea of how to manage things.

Changes to Law or Tax Rules

Future legislative changes or changes to tax rules could really upset the apple cart when it comes to managing and the tax implications of trusts. These changes could make it so that the benefits and obligations associated with trusts change, so it’s essential to stay on top of things and talk to a professional every now and then.

Keeping an ear to the ground for any changes or updates will help you navigate any changes and make sure your trust is up to date and beneficial.

Limited Access and Control

When property is put in a trust, the original owner loses direct control over the property which can make it harder to manage or sell it. Although a lifetime trust lets you stay involved in decisions, you’re no longer the outright owner and have less control over what you own.

Understanding this trade-off is crucial if you’re thinking about putting your house in a trust.

Risk of Disputes

Any ambiguities in a trust deed can lead to different people interpreting things in different ways which can lead to conflicts between beneficiaries and trustees. Disputes over the management and interpretation of the trust aren’t uncommon. Clear advice from a lawyer and careful planning will help minimise the risk of disputes and ensure the trust runs smoothly.

Summary

Moving property into a trust involves a whole host of complex considerations. Getting to know the implications of SDLT and the different types of trusts is key to making informed decisions. By doing your homework and getting some professional advice, you can navigate the complexities of putting your home in a trust and maybe even benefit from any available exemptions and reliefs.

In the end, while putting your home in a trust can offer some big benefits, it does require careful thought about the associated costs and risks. Staying up to date with any changes in the law and tax rules, and planning for any potential disputes, will help ensure that your trust runs smoothly and effectively. With the right approach, you can manage your property transfer in a way that maximizes benefits and minimises liabilities.

Frequently Asked Questions

Can I put a property in trust to avoid Capital Gains Tax?

Placing a property in a discretionary trust can allow for holdover relief, deferring capital gains tax liability for the duration of the trust. However, this means you will forfeit any future income from the property.

What is Stamp Duty Land Tax (SDLT)?

Stamp Duty Land Tax (SDLT) is a tax levied on property purchases over a certain threshold in England and Northern Ireland, applicable to both residential and commercial properties. This tax serves to generate revenue from land transactions.

When is SDLT payable?

SDLT is payable within 14 days of completing a property purchase, and an SDLT return must be filed with HMRC at that time. Notably, SDLT is typically not required if a property is gifted to a trust without any associated debt.

What are the different types of trusts and their SDLT implications?

The different types of trusts include bare trusts, discretionary trusts, and life interest trusts, each with unique SDLT implications depending on the structure and beneficiaries involved. Understanding these distinctions is crucial for effective financial planning and compliance.

Are there any exemptions or reliefs from SDLT?

Indeed, there are exemptions and reliefs from SDLT, such as those for main residence replacement, transfers between spouses, and certain trust arrangements. It is important to assess specific circumstances to identify applicable reliefs.