Stamp Duty / SDLT

 

STAMP DUTY LAND TAX

Overview :

you must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England Wales and Northern Ireland

the current SDLT threshold is £125.000 for residential properties and £150.000 for non-residential land and properties

you pay tax when you :

  1. buy a freehold property
  2. buy a new or existing leasehold
  3. buy a property through a shared ownership scheme
  4. are transferred land or property in exchange for payment : eg you take on a mortgage or buy a share in a house

How much you pay

how much you pay depends on whether the land or property is :

  1. residential
  2. non-residential or mixed use

you can use the HMRC Stamp Duty Land Tax calculator to work out how much tax you will pay

you may be able to reduce the amount of tax you pay by claiming relief : e.g. if you buy more than one property

The value you pay SDLT on : ‘the consideration’

the total value you pay SDLT on (sometimes called the consideration) is usually the price you pay for the property or land

sometimes it might include another type of payment like :

  1. goods
  2. work or services
  3. release from a debt
  4. transfer of a debt including the value of any outstanding mortgage

How and when to pay

you must send an SDLT return to HMRC and pay the tax within 30 days of completion

if you have a Solicitor they will usually file your return and pay the tax on your behalf following completion and add the amount to their fees : you can also file a return and pay the tax yourself

there are certain situations where you don’t need to file a return

you may be charged penalties and interest if you don’t file your return and make your payment within 30 days of completion

Residential Property Rates

you pay Stamp Duty Land Tax (SDLT) on increasing portions of the property price above £125.000 when you buy residential property : eg a house or a flat

you can use the SDLT calculator on the GOV.UK website to work out how much tax you will pay

an SDLT return is still required for transactions under £125.000 unless they are exempt

freehold sales and transfers

you can also use this table to work out the SDLT for the purchase price of a lease (‘the lease premium’)

 

property or lease premium or transfer value SDLT rate
up to £125.000 zero
the next £125.000 (the portion from £125.001 to £250.000) 2%
the next £675.000 (the portion from £250.001 to £925.000) 5%
the next £575.000 (the portion from £925.001 to £1.5 million) 10%
the remaining amount (the portion above £1.5 million) 12%

 

example : if you buy a house for £275.000 the SDLT you owe is calculated as follows

 

0% on the first £125.000 : 0.
2% on the next £125.000 : 2500.
5% on the final £25.000 : 1250.
total SDLT liability : 3750.

 

New Leasehold Sales and Transfers

when you buy a new residential leasehold property you pay SDLT on the purchase price of the lease (‘the lease premium’) using the rates above

if the total rent over the life of the lease (known as the ‘net present value’) is more than £125.000 you also pay SDLT of 1% on the portion over £125.000 unless you buy an existing (assigned) lease

How much you will pay

you can work out how much SDLT you will pay for your new residential lease using HMRC’s :

  1. SDLT calculator
  2. guidance on leasehold purchases

Higher rates for additional properties

you will usually have to pay 3% on top of the normal SDLT rates if buying a new residential property means you will own more than one

you can use the SDLT calculator to work out how much tax you will pay

If you are replacing your main residence

you won’t pay the extra 3% SDLT if the property you are buying is replacing your main residence and that has already been sold

if there is a delay selling your main residence and it hasn’t been sold on the day you complete your purchase :

  1. u will have to pay higher rates because you own two properties
  2. you may be able to get a refund if you sell your previous main residence within 36 months

special rules : there are special rules if you own property with someone else or already own a property outside England Wales and Northern Ireland

special rates : there are different SDLT rules and rate calculations for :

  1. corporate bodies
  2. people buying six or more residential properties in one transaction
  3. shared ownership properties
  4. multiple purchases or transfers between the same buyer and seller
  5. purchases that mean you own more than one property
  6. companies and trusts buying residential property

Non residential and mixed use land property rates

further details can be supplied on request

Land and Property Transfers

you may have to pay Stamp Duty Land Tax (SDLT) if the ownership of land or property is transferred to you in exchange for any payment or consideration : the rules will depend on the specific circumstances surrounding the transfer : HMRC has guidance on transfers :

  1. as a result of marriage, civil partnerships or moving in together
  2. on divorce, separation or the end of a civil partnership
  3. of jointly owned property or land
  4. if the larger share is given as a gift
  5. given as a gift or left in a Will
  6. to or from a company

Shared Ownership property

you may have to pay Stamp Duty Land Tax (SDLT) when you buy a property through a shared ownership scheme run by an approved public body : this includes :

  1. local housing authorities
  2. housing associations
  3. housing action trusts
  4. the Commission for New Towns
  5. development corporations

you can to either :

  1. make a one off payment based on the market value of the property
  2. pay SDLT in stages

market value election

submit a return and pay SDLT at the residential rate : use the total market value of the property to calculate how much to pay : even if you are only buying a share

you don’t pay any more SDLT after this even if you buy a bigger share in the property later on

paying in stages

you make your first SDLT payment on the price you pay for the lease if it is above the SDLT threshold : if the lease premium is below the threshold you don’t pay SDLT at this point but you still have to submit a return

you may have to pay extra SDLT if the total rent over the life of the lease (known as the ‘net present value’) is more than £125.000 : this can be worked out on the HMRC calculator : you will pay SDLT on the amount over £125.000 : add this to any SDLT you are paying on the lease premium

SDLT if you buy more shares

if you buy any more shares in the property, you don’t have to pay any more SDLT or send a return to HMRC until you own more than an 80% share

once your share of the property goes over 80% you must send a return and pay SDLT on :

  1. the transaction that took you over 80%
  2. any transactions after that

calculating your SDLT

to work out the SDLT if you buy more shares that take you over the 80% :

  1. work out the SDLT due on the total you’ve paid for the property to date
  2. divide the amount you are paying for this share by the total amount you’ve paid for the property to date
  3. multiply the two figures

you may have to pay extra SDLT on previous shares if they become ‘linked’ to later shares : shares only become linked once you own over 80% of the property

Reliefs and Exemptions

you may be eligible for SDLT reliefs in certain situations : these reliefs can reduce the amount of tax you pay

you must complete an SDLT return to claim relief even if no tax is due

HMRC has guidance for SDLT reliefs for :

  1. multiple dwellings
  2. building companies buying an individual’s home
  3. employers buying an employee’s house
  4. local authorities making compulsory purchases
  5. property developers providing amenities to communities
  6. companies transferring property to another company
  7. charities
  8. right to buy properties
  9. registered social landlords

Exemptions :

you don’t have to pay SDLT or file a return if :

  1. no money or other payment changes hands for a land or property transfer
  2. property is left to you in a Will
  3. property is transferred because of divorce or dissolution of a civil partnership
  4. you buy a freehold property for less than £40.000
  5. you buy a new or assigned lease of 7 years or more, as long as the premium is less than £40.000 and the annual rent is less than £1000
  6. you buy a new or assigned lease of less than 7 years, as long at the amount you pay is less than the residential SDLT threshold
  7. you use alternative property arrangements : eg to comply with Sharia law

latest review : 2016
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