Buying Property from a Family Member: SDLT on Connected Party Deals
When you buy from a family member at a discount, SDLT is charged on the actual consideration you give, not on the property's open market value. The deemed market value rule in s.53 FA 2003 applies only where the purchaser is a company connected with the seller, so it does not catch an ordinary parent-to-child or sibling-to-sibling sale.
Last verified: 26 August 2026
Key Takeaways
- •Between individuals, SDLT is charged on the actual chargeable consideration you give, not on open market value. A parent selling to a child below market value is taxed on the price actually paid.
- •Section 53 FA 2003 is headed "Deemed market value where transaction involves connected company". It applies only where the purchaser is a company, and either the vendor is connected with that company or some or all of the consideration is the issue or transfer of shares in a connected company.
- •"Connected" includes spouse/civil partner, parent, child, sibling, and their spouses, as well as companies under common control. Connection is relevant to the s.53 company rule and to certain reliefs, not to a general market value substitution between individuals.
- •An outright gift with no cash paid and no mortgage taken over means chargeable consideration of £0 and no SDLT is due.
- •If you take over an outstanding mortgage on a gifted property, the debt assumed is chargeable consideration and SDLT is charged on it.
- •The higher rates for additional dwellings and first-time buyer relief are unaffected by any of this. They apply on their own terms, calculated on the actual consideration.
- •Selling below market value can still have capital gains tax and inheritance tax consequences for the seller. Those are separate taxes and do not change the buyer's SDLT.
What the Connected Party Rule Actually Does
Common misconception: it is widely believed that buying from a relative at a discount means SDLT is charged on the property's market value. That is not the law. Section 53 FA 2003 is headed "Deemed market value where transaction involves connected company" and applies only where the purchaser is a company. A sale between individuals is charged on the actual consideration.
Section 53 of the Finance Act 2003 applies where the purchaser is a company and either the vendor is connected with the purchaser, or some or all of the consideration consists of the issue or transfer of shares in a company connected with the vendor. Where it applies, the chargeable consideration is treated as not less than the open market value of the subject-matter of the transaction.
It does not apply to a transfer between connected individuals. In plain terms: if a parent sells a house to their child for £300,000 when the property is worth £400,000 on the open market, SDLT is calculated on £300,000, the consideration actually given. The discount is not taxed, and there is no market value substitution simply because buyer and seller are related.
The same logic covers an outright gift. Where a property passes between individuals for no consideration at all and the recipient takes on no debt, there is no chargeable consideration and so no SDLT, whatever the property is worth.
The rule exists to stop an owner moving property into a company they control at a nominal price and paying tax on that nominal figure. That is a corporate structuring problem, which is why the section is aimed at company purchasers rather than at families.
Two things can still change the figure on a family purchase. First, consideration that is easy to overlook: most commonly a mortgage the buyer takes over, which counts as chargeable consideration at its face value. Second, HMRC can challenge a transfer that forms part of a wider scheme under the SDLT anti-avoidance rule in s.75A FA 2003. Neither turns an ordinary discounted family sale into a market value charge.
Selling below market value can still matter for other taxes. The seller may have capital gains tax to consider if the property was not their only or main residence, and the discount is a gift for inheritance tax purposes. Those are separate taxes with their own rules, they fall on the seller rather than the buyer, and they do not increase the SDLT due.
Statutory reference: Finance Act 2003, s.53, "Deemed market value where transaction involves connected company". In summary, the section bites where the purchaser is a company and either the vendor is connected with the purchaser, or the consideration includes the issue or transfer of shares in a company connected with the vendor. There is no equivalent market value rule for a transfer between connected individuals.
Who Counts as Connected?
The definition of "connected person" for SDLT purposes follows s.1122 of the Corporation Tax Act 2010. Being connected does not, by itself, change how much SDLT you pay when you buy from a relative. It matters because it is one of the conditions for the s.53 company rule, because it denies certain reliefs such as sub-sale relief, and because it is relevant when working out whether transactions are linked. The key connected relationships for family property transactions are:
| Relationship | Connected? |
|---|---|
| Spouse or civil partner | Yes |
| Parent or child | Yes |
| Sibling (brother or sister) | Yes |
| Lineal ancestor or descendant (grandparent, grandchild) | Yes |
| Spouse or civil partner of the above relatives | Yes |
| Unmarried cohabiting partner | No |
| Friend or acquaintance | No |
| Companies under common control | Yes |
Unmarried partners are NOT connected: The connected person rules do not extend to cohabiting (unmarried) partners. In practice this makes no difference to the SDLT on a discounted sale between individuals, because SDLT is charged on the actual consideration paid whether or not the parties are connected. Connection matters for the s.53 company rule and for relief eligibility.
Worked Examples
Parent sells to child at a discount
Scenario: Parent sells house to child for £300,000. Open market value assessed at £400,000. The buyer is an individual who owns no other property, so SDLT is charged on the actual consideration of £300,000 at the standard residential rates.
| Basis | Consideration | SDLT Due |
|---|---|---|
| Actual consideration paid (the correct basis) | £300,000 | £5,000 |
| Open market value (s.53 FA 2003, company purchasers only) | £400,000 | £10,000 |
SDLT on £300,000: 0% on £0 to £125k = £0; 2% on £125k to £250k = £2,500; 5% on £250k to £300k = £2,500. Total: £5,000.
The £100,000 discount is a gift of equity. It is not chargeable consideration and it does not increase the child's SDLT. Filing this purchase on the £400,000 market value would produce £10,000, which is £5,000 more than the law requires.
What this means in practice
The child pays £5,000 in SDLT on a property they bought for £300,000, because SDLT follows the consideration that actually changes hands. If a return has already been filed on the market value figure in error, the overpayment is not lost: it can usually be put right by amending the return or making an overpayment relief claim, but statutory time limits apply, so raise it with your solicitor promptly. Separately, the parent may have capital gains tax to consider if the property was not their only or main residence, and the £100,000 discount is a gift for inheritance tax purposes. Neither of those affects the buyer's SDLT.
The same purchase where the buyer already owns a home
If the child already owns another dwelling and is not replacing a main residence, the higher rates for additional dwellings apply: 5 percentage points on top of every band. The surcharge is charged on the same actual consideration of £300,000, not on market value.
Higher rates on £300,000: 5% on £0 to £125k = £6,250; 7% on £125k to £250k = £8,750; 10% on £250k to £300k = £5,000. Total: £20,000.
A first-time buyer is treated the same way, on the actual consideration. First-time buyer relief charges 0% on the first £300,000 where the chargeable consideration is £500,000 or less, so a first-time buyer paying £300,000 for a parent's house pays no SDLT at all. Note that the £500,000 ceiling is tested against the price actually paid, not the property's market value.
Gifted Property and Mortgages
When a family member gifts a property outright (with no cash consideration and no outstanding mortgage) the chargeable consideration is £0. No SDLT is due, regardless of the property's market value. There is no market value substitution for a gift between individuals, so the value of the property does not create a charge on its own.
However, if the gifted property carries an outstanding mortgage that the recipient takes over, the assumed debt becomes the chargeable consideration. SDLT is charged on the amount of the mortgage debt assumed, even though no cash changes hands.
This catches many families off guard. A parent wanting to help their child onto the property ladder by gifting them a flat assumes that because no money is exchanged, there is no tax to pay. If there is still a mortgage on the property, the child is acquiring that debt as part of the deal, and HMRC treats the debt as the chargeable consideration. The same logic applies to equity release products: if the property has a lifetime mortgage or other secured debt, taking that over triggers SDLT on the outstanding balance.
Gift with £150,000 outstanding mortgage
| Band | Rate | Tax |
|---|---|---|
| £0 to £125,000 | 0% | £0 |
| £125,000 to £150,000 | 2% | £500 |
| Total SDLT on assumed mortgage debt | £500 | |
Chargeable consideration = £150,000, the mortgage debt taken over. The market value of the property is not substituted for that figure. If the recipient already owns another dwelling, the higher rates apply to the same £150,000.
Pure gift (no mortgage)
£0
No consideration, no SDLT
Gift with £150k mortgage assumed
£500
SDLT charged on assumed debt
Taking over part of a mortgage? That can mean stamp duty
A transfer can owe stamp duty even when no cash changes hands. Divorce transfers are usually exempt.
What to Disclose
The SDLT land transaction return must accurately reflect the chargeable consideration. On a purchase from a relative that means the price actually paid plus anything else given for the property, most commonly a mortgage taken over from the seller. It does not mean the open market value. Market value is the measure only where s.53 FA 2003 applies, that is where the purchaser is a company connected with the seller.
HMRC risk-assesses SDLT returns, and on a family sale what attracts scrutiny is undeclared consideration rather than a low price: debt taken over, payments made outside the contract, or works and services provided as part of the deal. Keep the contract, the completion statement and the mortgage paperwork so the figure on the return can be evidenced if a compliance check follows.
Equally, do not inflate the return to market value to be on the safe side. Overstating the chargeable consideration means paying tax that is not due, and recovering it means amending the return or making an overpayment relief claim within statutory time limits. Reporting the correct figure, with the paperwork to support it, is the accurate position in both directions.
Penalties for understating consideration: An incorrect SDLT return that understates chargeable consideration can attract a penalty of up to 30% of the unpaid tax (or 100% for deliberate concealment), plus interest on the underpayment. On a family purchase the usual cause is forgetting that a mortgage taken over from the seller counts as consideration.
Best practice: Record the price in writing, list any mortgage or other debt the buyer takes over, and file on that total. A RICS valuation is not needed to fix the SDLT figure on a sale between individuals. It is needed where the purchaser is a connected company and s.53 applies, and it is useful evidence for the seller's capital gains tax or inheritance tax position.
Common Mistakes to Avoid
Family property transactions produce more SDLT errors than almost any other type of purchase. The informal nature of deals between relatives leads buyers to underestimate the complexity of the rules. These are the mistakes that come up most often.
Mistake 1: Calculating SDLT on market value rather than the price actually paid
This is the most common error, and it costs the buyer money rather than saving it. A buyer whose parent sells them a £400,000 property for £300,000 is told to file on £400,000 because the parties are connected. The correct chargeable consideration is £300,000, so the SDLT is £5,000 and not £10,000. The deemed market value rule in s.53 FA 2003 applies only where the purchaser is a company. If a return has already gone in on the wrong basis, ask your solicitor about amending it or claiming overpayment relief without delay, because time limits apply.
Mistake 2: Assuming a "love and affection" transfer avoids SDLT
Some older guidance and online forums suggest that a transfer "for love and affection" is free of SDLT. This is only true if there is genuinely zero consideration (no cash, no mortgage, no debt). If any debt is assumed or any payment made, SDLT is due on that consideration. The phrase has no legal effect on the SDLT calculation.
Mistake 3: Forgetting about the additional dwelling surcharge
If the buyer already owns another property (even one they are living in) and is not replacing a main residence, the 5% additional dwelling surcharge applies on top of the standard rates. It is charged on the actual consideration, and it only bites where that consideration is £40,000 or more. In the example above, a child who already owns a property pays £20,000 on the same £300,000 purchase rather than £5,000. Family discounts do not exempt anyone from the surcharge.
Mistake 4: Buying through your own company and filing on the price agreed
This is the situation where s.53 FA 2003 does apply. Where the purchaser is a company and the vendor is connected with it, for example a landlord transferring a rental property into a company they control, the chargeable consideration is deemed to be not less than open market value however small the figure on the contract. A defensible valuation is essential here, and the higher rates for additional dwellings normally apply on top. Getting this backwards, filing a family sale on market value and a company transfer on a nominal price, is the worst of both errors.
Forum Spotlight
These are representative questions drawn from UK property forums, including r/HousingUK and MoneySavingExpert. The answers reflect the rules as they stand in April 2026.
Someone asked on a UK property forum:
"My parents want to sell me their house for £50,000 less than it is worth so I can afford to buy it. My solicitor says I owe SDLT on the full market value. Is that really right?"
No, and it is worth asking your solicitor which provision they are relying on. Section 53 of the Finance Act 2003 is headed "Deemed market value where transaction involves connected company" and applies only where the purchaser is a company. You are buying as an individual, so SDLT is charged on the consideration you actually give, which is the discounted price.
Two things to check before you file. First, are you taking over any mortgage on the property? Debt assumed is chargeable consideration and is added to the cash price. Second, do you already own another dwelling? If so the higher rates apply, again on the price paid. Your parents may have capital gains tax to consider if this was not their only or main home, and the discount is a gift for inheritance tax purposes, but neither of those changes your SDLT.
Someone asked on a UK property forum:
"My gran wants to give me her flat. It is worth about £180,000 and still has a mortgage of £40,000 on it. How much SDLT do I owe?"
When you take over your grandmother's mortgage, the £40,000 outstanding debt becomes the chargeable consideration for SDLT purposes. On £40,000, SDLT is nil (the threshold is £125,000 at standard rates). So in this case, you would pay no SDLT at all, provided the only consideration is the assumed mortgage debt.
However, if you already own a property the higher rates for additional dwellings apply to that assumed debt. Those rates bite where the chargeable consideration is £40,000 or more, so at exactly £40,000 the surcharge applies at 5%, giving an SDLT charge of £2,000. The £180,000 value of the flat is not the measure either way. Check your position with your solicitor before assuming the figure is zero.
Someone asked on a UK property forum:
"I am buying my parents' house at full market value. They want to immediately gift me a sum of money to use as a deposit. Does HMRC see through this arrangement?"
SDLT is charged on the consideration you give for the property, so the figure on the return is the price you actually pay. A separate gift of money from your parents is not consideration for the house and does not change that figure, provided the two arrangements really are independent. If in substance the "gift" is a reduction in the price, then the net amount is the consideration and the return should reflect that lower figure. Either way, keep the transactions clearly separate and document both. The gift may matter for your parents' inheritance tax position, which is a different tax from SDLT.
Someone asked on a UK property forum:
"My brother and I are not speaking and I am buying his share of our jointly-inherited property. We agreed a price below what a surveyor said it was worth. Do the connected party rules apply?"
Siblings are connected persons under s.1122 CTA 2010, but that does not move you onto market value. The deemed market value rule in s.53 FA 2003 needs a company purchaser, and you are buying as an individual, so SDLT is charged on what you give for your brother's share. Watch the mortgage: if the property is mortgaged and you take over his share of the debt, that debt is chargeable consideration on top of any cash you pay him. The higher rates may also apply if you own another dwelling. Your brother's capital gains position on the sale is separate and does not affect your SDLT.
Frequently Asked Questions
Do I pay stamp duty on market value if my family sells to me at a discount?
No. On a sale between individuals, SDLT is charged on the actual chargeable consideration you give, which is the price you pay plus any mortgage debt you take over. The deemed market value rule in s.53 FA 2003 applies only where the purchaser is a company connected with the seller. HMRC risk-assesses returns for consideration that has not been declared, such as debt assumed, rather than for a low price agreed between relatives.
Does the connected party rule apply to unmarried partners?
No. Unmarried cohabiting partners are not "connected persons" for SDLT purposes. The connected party rules apply to legal family relationships and business connections, not romantic relationships. It makes no difference to the amount payable on a discounted sale in any event, because SDLT is charged on the actual consideration whether or not the parties are connected.
My parents want to gift me their second home. How much SDLT will I pay?
If the property has no outstanding mortgage and is gifted outright, the chargeable consideration is £0, meaning no SDLT, whatever the property is worth. If there is a mortgage you take over, SDLT is charged on the debt assumed, and the higher rates apply to that debt if you already own a dwelling and the debt is £40,000 or more.
Does the market value rule apply if I buy my parents' house through my own company?
Yes. That is the situation s.53 FA 2003 was written for. Where the purchaser is a company and the vendor is connected with it, the chargeable consideration is deemed to be not less than the open market value, so a transfer at a nominal price is still charged on the full value. The higher rates for additional dwellings normally apply on top, which is why a company purchase usually costs more than the same purchase made by an individual.
Reviewed by
Julie White
ACAStamp duty specialist since 1999Stamp Duty Land Tax Specialist
ACA and Tax Adviser with a career spanning nearly four decades, specialising in stamp duty planning and advisory work since 1999.