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Understanding Stamp Duty Land Tax

| Published on September 15, 2016

Lucy Beck, Associate and Chartered Legal Executive at Humphries Kirk Bournemouth, explains the most recent changes to Stamp Duty Land Tax (SDLT) for residential properties.

When you are looking at purchasing a property, it is important to budget for all the costs you will encounter ensuring that you have finances in place to cover everything – the last thing you want is a nasty surprise before completion.

What is SDLT and when is it payable?

SDLT is the tax payable on the chargeable consideration relating to a land transaction; either a purchase or a transfer. A return must be provided to HM Revenue and Customs (HMRC) on all transactions over £40,000, even though tax may not be payable.

What are the standard rates of SDLT?

On a standard property, whether registered or unregistered, freehold or leasehold, the thresholds are:

  • Up to £125,000 – Zero
  • Over £125,000 to £250,000 – 2%
  • Over £250,000 to £925,000 – 5%
  • Over £925,000 to £1.5m – 10%
  • Over £1.5m – 12%

The amount of tax payable is cumulatively added up. For example, nothing is payable on the first £125,000, 2% on the purchase price amount between £125,000 and £250,000, 5% between £250,000 and £925,000 and so on.

Further consideration would need to be made where the property is under Shared Ownership and legal advice should be sought prior to proceeding with a purchase.

When are the higher rates of SDLT payable?

If you are purchasing an additional property, for investment purposes, and you or your co-purchaser own a share in any other property in the world, you will need to pay the higher rate of SDLT as follows:

  • Up to £125,000 – 3%
  • Over £125,000 to £250,000 – 5%
  • Over £250,000 to £925,000 – 8%
  • Over £925,000 to £1.5m – 13%
  • Over £1.5m – 15%

If the property is to be your main residence and your existing property has not been sold before the new purchase, you will need to pay the higher rate of tax and apply for a refund from HMRC once the sale of the existing property has reached completion. A refund must be filed for within three years of the purchase.

When is SDLT not payable?

Where the purchaser does not own any other properties and the property or land in question is under the value of £125,000, SDLT will not be payable. Furthermore, where a Transfer is required under the terms of a Divorce Court Order or bequeathed by Will, tax will not be payable.

If you require further information in relation to SDLT or any property matters, please contact Lucy Beck on 01202 421111.

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