If you are buying property, then Stamp Duty Land Tax (SDLT) is payable on the residential property purchase price in the UK.
SDLT tax rates and allowances often change, so when you are buying a property, you should be aware of the Stamp Duty Land Tax rates, reliefs and exemptions to calculate how much you need to pay.
In this blog, we will look at SDLT rates and thresholds for a wide variety of people and circumstances.
What is stamp duty land tax?
Individuals must pay Stamp Duty Land Tax (SDLT) if they buy a property or land over a certain price in England and Northern Ireland. There are different rules and taxes for Scotland and Wales as per below.
- Scotland - pay Land and Buildings Transaction Tax (LBTT).
- Wales - pay Land Transaction Tax.
You pay the tax when you:
- Buy a freehold property
- Buy a new or existing leasehold
- Buy a property through a shared ownership scheme
- are transferred land or property in exchange for payment, for example you take on a mortgage or buy a share in a house
Stamp duty land tax thresholds
There is an allowance called a threshold whereby if your property purchase price is less than the threshold, there will be no Stamp Duty to pay.
The thresholds for 2023/24 are:
- £250,000 for residential properties
- £425,000 for first-time buyers buying a residential property worth £625,000 or lessNational Insurance credits you’ve received
- £150,000 for non-residential land and properties.
Stamp duty residential property rates 2023
Below are the normal Stamp Duty rates for 2023 if you are purchasing residential property in England and Northern Ireland.
Property price Stamp Duty rate
- £0 - £250,000 0%
- £250,000 - £925,000 5%
- £925,000 - £1,500,000 10%
- Over £1.5 million 12%
How much Stamp duty will I pay?
The rules are a little more complicated around how much Stamp Duty you will pay as there are different rules for residential properties in England and Northern Ireland and it will depend on whether the land or property will be used as a residential property, commercial property or mixed-use property. It will also depend on whether you are eligible for any reliefs or exemptions.
Gaps in your National Insurance record
Some individuals dont pay National Insurance for some periods, for example when on a low income or taking a career break to care for children or elderly relatives.
The amount you pay depends on:
- when you bought the property
- how much you paid for it
- whether you’re eligible for relief or an exemption
There are also different rates of SDLT if you are one of the following:
- You’re a first-time buyer
- You already own a property and you’re buying an additional property that is not your main residence
- You’re an overseas buyer and not a UK resident
Stamp Duty Land Tax rates for a single property
You pay stamp duty at these rates if, after buying the property, it is the only residential property you own. You usually pay 3% on top of these rates if you purchase another property and you own other residential properties.
SDLT rates for first time buyers
First-time buyers can claim a discount (relief).
- If you are a first-time buyers in England or Northern Ireland, you pay no Stamp Duty on properties up to a value of £425,000.
- Youll be eligible if you and anyone else youre buying with are first time buyers.
- Youll pay 5% SDLT on the portion from £425,000 to £625,000.
- You will pay standard rates of Stamp Duty as you wont qualify for first-time buyer relief.
SDLT rates on buy-to-let properties, second homes and additional property purchases
If you’re buying additional property over and above your main residence, such as a second home or a buy-to-let property you’ll have to pay an extra 3% in Stamp Duty on top of the standard rates.
This increased rate applies to properties bought for £40,000 or more. It doesn’t apply to caravans, mobile homes or houseboats.
Property price Stamp Duty rates for buy to let properties/second and additional property purchased
- £0 - £250,000 3%
- £250,000 - £925,000 8%
- £925,000 - £1,500,000 13%
- Over £1.5 million 15%
New leasehold sales and transfers
When you buy a new residential leasehold property you pay SDLT on the purchase price of the lease (the ‘lease premium’) using the rates above.
If the total rent over the life of the lease (known as the ‘net present value’) is more than the SDLT threshold (currently £250,000), you’ll pay SDLT at 1% on the portion over £250,000.
This does not apply to existing (‘assigned’) leases.
Higher rate SDLT
You must pay the higher SDLT rates when you buy additional residential properties (or a part of one) for £40,000 or more if all the following applies:
- it will not be the only residential property worth £40,000 or more that you own (or part own) anywhere in the world.
- you have not sold or given away your previous main home.
- no one else has a lease on it which has more than 21 years left to run.
Replacing your main residence
You will not pay the extra 3% SDLT if the property you’re 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, you’ll have to pay higher rates. This is because you own 2 properties. However, you can apply for a refund if you sell your previous main home within 36 months.
You must have sold your previous main residence within 3 years of buying the new property to qualify for a refund unless exceptional circumstances apply.
Rates for non-residential and mixed land and property
You pay SDLT on increasing portions of the property price (or ‘consideration’) when you pay £150,000 or more for non-residential or mixed (also known as ‘mixed use’) land or property.
Higher rate SDLT for married couples and civil partnership
It’s important to note that married couples, or those in civil partnerships, are treated as a single person by HMRC for SDLT purposes.? The rules apply to you both as if you were buying the property together, even if you’re not.
If either of you individually has to pay the higher rates, you must pay the higher rates for the transaction as a whole (unless you’re permanently separated).
Unmarried couples are treated individually for SDLT purposes by HMRC.
Buying property with someone else
The rules apply to each person (and their spouse) who is buying the property.
If any of you individually have to pay the higher rates, you must pay the higher rates for the transaction as a whole.
Stamp Duty Land Tax (SDLT) on divorce
In general, there is no exemption for SDLT on the transfer of properties between spouses or civil partners living together. The only relief is that the transfers are charged at the standard residential rates and the 3% higher surcharge will not apply to these transfers.
The transfer of properties will be exempt from SDLT if they are in connection with the divorce, dissolving a civil partnership, or legally separating or annul their marriage. The exemption will only apply if the transfer is made under a court order, judicial separation or in connection with the pursuance of dissolution or annulment of the marriage.
Further, the transaction between the couples will normally be exempt and any transfers involving a third party will still be subject to SDLT.
Stamp Duty rates for non-UK residents
From 1st April 2021, a 2% stamp duty surcharge was introduced for overseas buyers on the purchase of residential property in England and Northern Ireland.
The surcharge applies to non-resident buyers regardless of the type of buyer (e.g. company or individual) subject to very few exceptions for collective investment vehicles such as REITs.
The surcharge is in addition to the existing 3% stamp duty surcharge on purchases of “additional” dwellings such as buy-to-lets and second homes.
Circumstances where SDLT may not be payable
There may be circumstances where Stamp Duty may not be payable. Some examples might include:
- • Transfer of property in pursuance of a court order during separation, divorce or dissolution are generally exempt. If a couple agrees to separate permanently without getting a court order, they will be treated for SDLT purposes as an unmarried couple.
- • Property left under the terms of a Will (inherited property) may not be subject to SDLT provided no other consideration is given. There is usually no requirement to inform HRMC in this case.
- • If you gift your home to someone else, they won’t have to pay SDLT on the market value of the property provided there is no outstanding mortgage on the property. If you take over some or all of an existing mortgage, SDLT may be payable on the value of the mortgage over the relevant SDLT threshold.
Seek advice from a professional tax advisor.
Property ownership is exciting, but SDLT rates and thresholds change so navigating the complexities of property taxes can be daunting, especially when it comes to Stamp Duty Land Tax (SDLT) in the UK. This is where dns accountants can help. For more advice on Stamp Duty and other property taxes
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