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JGM, Solicitor
Category: Law
Satisfied Customers: 12370
Experience:  30 years as a practising solicitor.
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My mother owns a property worth £1,400,000 with an

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My mother owns a property worth £1,400,000 with an outstanding interest only mortgage of £300,000. Her mortgage term is about to expire but she cannot remortgage based on her income alone (originally the mortgage taken out with my father before he passed away). She is considering adding my brother and I to the mortgage application so as to be able to remortgage. What are the tax implications of that with respect to stamp duty and inheritance tax?

Thanks for your question. Will the house be owned equally between the three of you? If that is the case, then the stamp duty on the transfer will be calculated on a consideration of £200,000 being two thirds of the proposed mortgage. As regards ***** ***** if your mother survives for seven years from the date of transfer then she will have succeeded in reducing her estate by two thirds of the value of the house. If she doesn’t then her estate will have to add back a proportionate amount of value depending on how long she does survive for within the seven year period:

  • If the gift was made less than three years before death, no reduction in tax is due
  • If the gift was made three to four years before death, tax is reduced by 20%
  • If the gift was made four to five years before death, tax is reduced by 40%
  • If the gift was made five to six years before death, tax is reduced by 60%
  • If the gift was made six to seven years before death, tax is reduced by 80%.

I hope that helps. Please leave a positive rating so that I am credited for my time.

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Customer: replied 8 months ago.
Thank you for your response. Yes the property would be shared equally between the three of us. You say the consideration would be £200,000 (i.e. £100,000 for each sibling's third) for stamp duty. How is this then actually calculated - do we pay stamp duty on £200,000 jointly (3% on 125k + 5% on 75k = £7,500) or do we each individually pay stamp duty on £100,000 (3% on 100k = £3,000 each)?Will happily leave a positive rating. Many thanks.

Stamp duty is paid on the property, so the individuals are jointly and severally liable to make payment at the point of transfer via the solicitor concerned. The proportion and who pays is up to the individuals. The solicitor will simply ask all of you to put him in funds prior to settlement.