What is Stamp Duty?
Stamp Duty (SDLT) is a payment liable when buying a property in England and Northern Ireland over a certain amount. If your property is in Scotland or Wales there is a different Land Transaction Tax which is applicable. In this article Licensed Conveyancer Sarah Rowles looks at the details.
When do I pay Stamp Duty?
You pay tax when you buy a freehold property, a new or existing lease, a property through a shared ownership scheme and in the transfers of land or property in exchange for payment.
How much Stamp Duty will you have to pay when buying a residential property?
SDLT is tiered, meaning that you pay different rates on different portions of the property price. This will depends on your use of the property and takes into consideration if you are a first time buyer, home mover or buying an additional property as a buy-to-let or second home.
What are the current Stamp Duty thresholds?
There is no SDLT payable if you buy a residential property for less than £250,000.
The threshold for first time buyers is £425,000 provided they are buying a residential property for a value of £625,000 or less.
There is a threshold of £150,000 for non-residential land and properties.
What are the Rates of Stamp Duty for a single property?
If you are buying a single residential property and this will be the only property you own on completion then you will pay the following rates:-
Property or lease premium or transfer value SDLT rate
Up to £250,000 Nil payable
The next £675,000 (i.e. £250,000 to £925,000) 5%
The next £575,0000 (i.e. £925,001 to £1.5million) 10%
The remaining amount (above £1.5million) 12%
Buying your first home
You can claim relief (i.e. a discount) if the property you are buying is your first home. This means that you will pay no SDLT up to £425,000 and then 5% on the portion from £425,001 to £625,000. If the purchase price is over £625,000 then you cannot claim relief.
New Leasehold Transfers and Sales
When you buy a new residential leasehold property you pay SDLT on the purchase price of the Lease i.e. the Lease Premium. If the total rent over the life of the Lease (known as the net present value) is more than £250,000 then you will pay 1% SDLT on the portion over £250,000. This does not apply to existing Leases.
Higher rates for additional properties
You will be required to pay 3% on top of SDLT if buying a new residential property means you will own more than one. This higher rate is not applicable if the property you are buying is replacing your main residence and that has already been sold. If you have not sold your main residence on the day you complete your new purchase than you will be liable to pay the higher rates. This is because you own 2 properties. You can however apply for a refund if you sell your main home within 36 months.
When do you pay Stamp Duty?
Your solicitor must file a Stamp Duty Land Tax Return and make the subsequent SDLT payment to HMRC within 14 days of completion. There may be penalties and interest if the return is not filed and paid within these timescales.
How we can help
There is a lot to think about when buying or selling a property. By being well-informed and seeking professional advice when needed, you will be able to navigate the process with ease.
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