Stamp Duty Land Tax Guide
When buying a property, you will likely have to pay Stamp Duty Land Tax. This government tax applies when you purchase a property that values more than a particular price.
The amount of Stamp Duty Land Tax you have to pay will depend on whether or not you are a first-time buyer, the area you are in, for example, England or Wales, and what type of property or land you are purchasing.
This can feel overwhelming, but with the support of an expert conveyancing solicitor and an understanding of how Stamp Duty Land Tax works, you will avoid further stress.
In the following guide, we will discuss everything you need to know about Stamp Duty Land Tax, including:
- Stamp Duty Land Tax for residential properties
- Effects of Stamp Duty Land Tax for mixed use properties
- The impact of Stamp Duty Land Tax on buy to let properties
- How Stamp Duty Land Tax affects first-time buyers
- Who is exempt from Stamp Duty Land Tax?
- Stamp Duty Land Tax rates for non-UK residents
- How much Stamp Duty Land Tax should you be paying?
- How and when should you pay Stamp Duty Land Tax?
Stamp Duty Land Tax for residential properties
The amount of Stamp Duty Land Tax you will need to pay for residential properties will depend on a number of factors, such as the price of the property and the location.
Unless you are a first-time buyer, when purchasing a residential property over £250,000, you will be required to pay Stamp Duty Land Tax (SDLT). The amount of Stamp Duty you will pay is calculated based on how much of the purchase price falls within a number of price bands.
The Stamp Duty bands for England and Northern Ireland are:
- £0 - £250,000 = 0% SDLT
- £250,001 - £925,000 = 5% SDLT
- £925,001 - £1.5 million = 10% SDLT
- Over £1.5 million = 12% SDLT
For Scotland and Wales, however, these bands differ slightly.
Scotland’s Land and Building Transaction Tax
- £0 - £145,000 = 0% LBTT
- £145,001 - £250,00 = 2% LBTT
- £250,001 - £325,000 =5% LBTT
- £325,001 - £750,00 = 10% LBTT
- Over £750,000 = 12% LBTT
Land Transaction Tax in Wales
- £0 - £225,000 = 0% LTT
- £225,001- £400,000 = 6% LTT
- £400,001 - £750,000 = 7.5% LTT
- £750,001 - £1.5 million = 10% LTT
- Over £1.5 million = 12% LTT
If the property you are purchasing is not your first residential property, you will most likely have to pay a higher rate.
However, if this property is your first home, then you are entitled to a Stamp Duty Land Tax Discount. This means you will not have to pay any SDLT on properties up to £425,000 and only a 5% SDLT on the portion valued from £425,001 to £625,000.
Effects of Stamp Duty Land Tax for mixed use properties
A mixed-use property is a property that has both residential and non-residential uses.
Residential property is anywhere that is used as, turned into, or would be a suitable dwelling. Whereas a non-residential property includes everything else, for instance, shops, farmland, and woodland.
A mixed-use property can pay a lower Stamp Duty Land Tax rate than other types of property.
The impact of Stamp Duty Land Tax on buy-to-let properties
Any additional properties that are purchased to buy-to-let are subjected to a Stamp Duty Land Tax surcharge. This included properties brought to be a holiday home or a second home but do not involve houseboats or mobile homes.
The rates you must pay for a buy-to-let property are:
- £0 - £250,000 = 3% SDLT
- £250,001 - £925,000 = 8% SDLT
- £925,001 - £1.5 million = 13% SDLT
- Over £1.5 million = 15% SDLT
It’s also important to note that if a property is brought before the sale of the original property, you will also be required to pay the Stamp Duty Land Tax surcharge. However, this charge can be reclaimed if you are able to sell the original property within 18 months of purchasing the new one.
How Stamp Duty Land Tax affects first-time buyers
If you are a first-time buyer and the property you are purchasing is under £625,000, you are entitled to a discount on Stamp Duty Land Tax.
A first-time buyer is someone who has never owned property before, either in the UK or abroad. Additionally, if it is a joint purchase, everyone involved must also be a first-time buyer. This does not, however, include commercial property.
In the event that you are a first-time buyer and your property costs below £425,000, you will not have to pay Stamp Duty Land Tax. For properties that cost between £425,001 and £625,000, a first-time buyer will only have to pay Stamp Duty on the amount over £425,000.
Who is exempt from Stamp Duty Land Tax?
In addition to being a first-time buyer, there are a number of ways in which a buyer may be exempt from Stamp Duty Land Tax.
For instance, you don’t have to pay Stamp Duty Land Tax if the property was left to you in a Will. Additionally, you are not entitled to pay SDLT if the property was transferred to you due to a divorce/separation, the property was a gift, the property cost over £125,000, and the seller accepted a lower offer, or if the property is moveable like a houseboat.
Stamp Duty Land Tax rates for non-UK residents
When it comes to Stamp Duty Land Tax, you are not considered a UK resident if you have not been in the UK for a minimum of 6 months in the year before your property purchase.
In this case, you will be required to pay an additional 2% surcharge on your Stamp Duty Land Tax.
Additionally, non-UK buyers will still be required to pay for extra surcharges and be entitled to discounts, such as the first-time buyer discount.
How much Stamp Duty Land Tax should you be paying?
Stamp Duty Land Tax should be paid whenever a freehold property is purchased, land/property is transferred in exchange for a payment, the shared ownership scheme is used to purchase a property, or a new or existing leasehold is brought.
The amount of Stamp Duty Land Tax that you pay will depend on a wide number of factors, including but not limited to:
- Location, i.e. England, Scotland, Wales or Northern Ireland
- Property type
- The price of the property
As discussed above, there are different price bands for residential, mixed-use, and buy to let properties, as well as separate price bands depending on where you are buying in the UK.
SDLT will need to be paid if the property being purchased costs more than the Stamp Duty Land Tax threshold, £250,000 for residential properties and £150,000 for non-residential properties. The amount you pay will depend on if the buyer or the property qualifies for any SDLT discounts or is exempt.
For example, mobile homes are exempt, and first-time buyers only have to pay a reduced amount of SDLT if the property costs more than £425,000.
How and when should you pay Stamp Duty Land Tax?
Generally, a solicitor or property conveyancer will submit your Stamp Duty Land Tax payment and file the return on your behalf. SDLT must be paid within 14 days of the completion of the property transaction.
At this point, the solicitor or conveyancer will claim any SDLT discounts you are eligible for and add their fees to the total.
Even if SDLT is not payable on your property, you will be required to provide a return to the HMRC, and this also must be completed within 14 days of completion. A certificate from the HMRC confirming the acceptance of a return is necessary if you are changing the ownership of land or property.
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