Stamp duty article
Stamp Duty Land Tax (SDLT) is a tax charged on the purchase or acquisition of property or land over a certain price in England and Northern Ireland. The tax is different If the property or land is situated in Scotland or Wales.
Since 1st April 2016, the Chancellor of the Exchequer announced that higher rates of stamp duty would apply to purchases of additional residential properties, such as second homes and buy-to-let properties. The higher rates will be 3% above the standard rates.
Stamp Duty Land Tax Rates – Standard Rates
The following rates apply if you are replacing your main residence.
|Property or lease premium or transfer value||SDLT rate|
|Up to £500,00||Zero|
|The next £425,000 (the portion from £500,001 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%|
For example, if you replace your main residence at a purchase cost of £625,000. You will calculate the stamp duty as followed:
0% on the first £500,000 = £0
5% on the next £125,000 = £6,250
Total Stamp Duty Land Tax Due = £6,250
Stamp Duty Land Tax Rates – Higher Rates
If you are purchasing an additional property to your main residence higher rates of SDLT will apply. You will pay an additional 3% above the standard rates of SDLT shown above. They do not apply to purchases of property under £40,000 or purchases of caravans, mobile homes and houseboats.
The introduction of the higher rate SDLT caused a lot of confusion when first introduced and still does today. If you are considering purchasing a property I would strongly advise that you read these FAQ’s to find an answer to your particular situation. If you are still none the wiser, please, do NOT assume anything but get in touch and be certain of the SDLT position before you do anything.
|Band||Existing residential SDLT rates||New additional property SDLT rates|
|£0* – £500k||0%||3%|
|£500k – £925k||5%||5%|
|£925k – £1.5m||10%||13%|
For example, if you are buying an additional property at a purchase cost of £625,000. You will calculate the stamp duty as followed:
3% of the first £500,000 = £15,000
5% on the next £125,000 = £6250
Total Stamp Duty Land Tax Due = £21,250
Replacing Your Main Residence
If you are replacing your main residence the 3% additional stamp duty does not apply. If there is a delay in selling your main residence and it has not been sold on the day you complete on your new main residence, you will have to pay the higher SDLT rate as you will currently own 2 properties. However, if you sell your previous main residence within 36 months of purchasing your new main residence you will be able to claim a refund from HMRC.
If you are jointly purchasing a property and one of you currently hold another property that is not replacing your main residence, the higher rate SDLT will apply to the whole property.
The higher rate of Stamp Duty does not apply to the following:
1. The property is worth less than £40,000
2. The property has a mixture of residential and non-residential aspects (for example a shop and a flat above)
First Time Buyers
If you are purchasing your first home and the cost of the property is below £500,000 there will be no stamp duty payable.
If you are buying a property jointly, both purchasers need to be first time buyers.
Transferring Property with an outstanding mortgage
Joint owners of a property may agree that just one of them will take over ownership of a property they originally bought together, including any outstanding mortgage. If the share of the outstanding mortgage that is being transferred plus any consideration is more than £40,000 there will be SDLT due on the proportion of the outstanding mortgage that belongs to the share of the property being transferred even when no money is being exchanged. The 3% additional SDLT rate is not applied when an individual is purchasing a property from their spouse/civil partner provided that both individuals are living together (they do not have to be living in the property that is being transferred).
There is no SDLT due on a gift of a property provided that no outstanding mortgage is taken over. If the mortgage is more than £40,000, there may be a SDLT charge.
Transferring Property to a Company
When a property is transferred to a company, SDLT will be payable on the market value of the property and not the price the Company pays for it.
If a property has a market value of £300,000, but the company purchases the property for £150,000, SDLT will be payable on the £300,000.
Companies pay the additional 3% higher SDLT rates, unless the property is worth less than £40,000.
Changes for Non-residents from 1st April 2021
From 1st April 2021, there will be a 2% surcharge for non-residents buying properties in England or Northern Ireland.
© Thandi Nicholls Ltd 2020 All Rights Reserved – The above articles are provided for guidance only and may not cover your personal circumstances so you should not rely on them. It is important that you seek appropriate professional advice which takes into account your personal circumstances where you can provide the full facts of the case and all documents related to your case. Thandi Nicholls Ltd t/a uklandlordtax.co.uk, K Nicholls FCA or S Thandi cannot be held responsible for the consequences of any action or the consequences of deciding not to act.
Do you have a question for our experts?
If there’s a property tax issue that has you puzzled or worried, get in touch. Everyone on our team loves to talk, especially when it helps people like you find peace of mind.