Stamp Duty or Stamp Duty Land Tax (SDLT) as it is properly known is a tax charged on land and property transactions in the UK, payable by the buyer.
SDLT is a progressive tax on the purchase price of a property and is charged at different rates depending on the portion of the purchase price that falls within each rate band. The tax that is charged depends on both the purchase price and the nature of the buyers.
In the Autumn Budget 2017 SDLT relief was introduced for first time property owners. Provided that:
- The buyer (or both or all of the buyers if more than one) has not (or have not) previously owned an interest in a property, whether by way of purchase, inheritance or by benefitting under a trust which owns or owned property
- the property is being purchased for use as the main residence of the buyer (or buyers)
- the purchase price is £500,000 or less, and
- completion of the purchase takes place on or after 22 November 2017
- no SDLT will be payable on the first £300,000 of the purchase price, and
- SDLT will be payable at the rate of 5% on the amount of the purchase price between £300,001 and £500,000
If the purchase price exceeds £500,000, or if the buyer (or buyers) is not (or are not) first time property owners, then the following provisions apply.
Where the buyers are private individuals and do not already own, or partly own, another property which is not being sold at the same time the following rates apply:
Since 1 April 2016, additional SDLT has been payable in respect of “additional properties”, such as buy-to-lets and second homes. 3% will be payable on the first £125,000 of the purchase price of such properties. Above that figure, there will be an additional 3% payable at each band, over and above the rates set out in the table above, as follows:
Of particular note is that an unmarried couple can acquire one property each, or an interest in one property each, without the higher rates of SDLT becoming payable, whereas, if they are married or civil partners and one already owns a property or an interest in a property, then, if the other purchases a property or an interest in a property, the higher rate of SDLT may apply to that purchase. This is because, for the purposes of these new SDLT regulations, all property owned by either party to a marriage or civil partnership is deemed to be jointly owned, unless the parties are living apart from each other in circumstances in which the separation is likely to be permanent.
Another point to note is that where a party purchases a property but does not sell their main residence at the point of completing the new purchase, there is an opportunity to claim a refund from HMRC if the previous home is sold within 3 years of the purchase of the new one.
The higher rates will not apply to purchases of property under £40,000 or purchases of caravans, mobile homes and houseboats.
A calculator is available on the gov.uk website which calculates the amount of SDLT due on purchases of additional residential properties here.
However, it should be noted that where the buyers of a residential property include particular types of commercial or corporate entities SDLT is charged differently. See the HMRC website for further information.
Why do I have to pay Stamp Duty? When you buy a property the change of ownership of the property has to be registered at the Land Registry. The registration process requires a certificate which is issued by Her Majesty’s Revenue and Customs (HMRC). HMRC will only issue this certificate on receipt of the Stamp Duty due on the purchase price of the property.
Payment of Stamp Duty: Your conveyancer / solicitor will send your Stamp Duty payment to HMRC on your behalf as part of the process of buying your property. You will need to ensure the money to pay your Stamp Duty has been credited to your conveyancer’s / solicitor’s bank account before completion. More information on this can be found here.
We have put together a Guide to Moving Home, a PDF copy of which you can download by clicking here. The Guide covers everything you need to know about the buying and selling process. Alternatively contact us here or email email@example.com to request your free, no obligation, quotation.