Stamp Duty Land Tax Calculator, Forms and Exemptions

Stamp duty – or more precisely stamp duty land tax (SDLT) – is a tax paid by individuals who purchase a freehold, leasehold or shared ownership residential property in England, Northern Ireland and Wales. Taxes are generally charged as a percentage of the purchase price and depend on the type of property purchased i.e. residential property and commercial property. This tax is chargeable on residential property where the consideration exceeds 120,000 and on those involving commercial or mixed-use property where the consideration exceeds 150,000. One should also be aware of the changes in SDLT being done in 2017 before purchasing any property.

As the name suggest, SDLT replaced stamp duty on land transactions. Like its predecessor, SDLT is charged primarily on sales of land as a percentage of the purchase price and must be paid before the transaction can be registered with the Land Registry. But what exactly is Stamp Duty or SDLT? In the context of property of land, Stamp Duty is nothing more than a property tax. This article takes you through the various aspects of Stamp Duty, and explains it in layman’s terms.

As mentioned earlier, tax is chargeable on a percentage of the ‘chargeable consideration’ given for the transaction. A tier structure is put in place for various types of property, where buyers pay a rate based on the entire property purchase price.

This means that on a house worth £200,000 you would pay £2,000 @ 2% stamp duty, and as soon as you get up to say £300,000 the stamp duty climbs to £9,000, because you are on the 5% band.

When you buy property for £270,000, the SDLT will be calculated accordingly:

• 0% on the first £125,000 = £0
• 2% on the next £125,000 = £2,500
• 5% on the final £20,000 = £1,000
• Total SDLT = £3,500

NOTE: The tax authorities make no distinction between the property and the fixtures and fittings attached to the property. In other words, fixtures and fittings are also taxable. So, if a house is bought for £100,000 and you reckon that fixtures and fitting are work 3,000 you cannot pat stamp duty of only £97,000.

Stamp Duty on Second Properties

Starting April 2016, if you plan on buying a second home you will attract a higher tax rate however there is some reduction on buying a property for the first time. You will be required to pay tax on property worth 40,000 or more. For every additional band, you will be required to pay 3% higher.

Anything other than your primary residence constitutes as a second home. This includes, holiday homes, property investments or property within a family. This applies even in the case when your primary residence is in another country.

A person can also calculate SDLT online by visiting HMRC’s site.

SDLT Forms

For getting forms for filling up SDLT, one must take note of all the rules and regulations before submitting it to HMRC.

Note: If the property you are buying is replacing your existing home, you will not be liable to pay the additional 3%. If in case you have haven’t been able to sell your existing home, you can apply for a refund up to 36 months after you sell your existing home.

SDLT for Non-residential and Mixed-use Property

Beginning 17 March 2016, SDLT for non-residential and mixed-use property changed to a banding system. This applies for property where the consideration exceeds £150,000. A mixed-use property is one that has both residential and non-residential elements, like a residence connected to a shop.

Non-residential property includes:

• Commercial property such as shops or offices
• Agricultural land
• Forests
• Any other land or property which is not used as a dwelling
• Six or more residential properties bought in a single transaction

The SDLT rates are as follows:

SDLT for First Time Home Buyer

First-time home buyers will be exempt from paying Stamp Duty on properties worth up to £300,000. For properties worth between £300,000 and £500,000, Stamp Duty will be exempt on the first £300,000. The remaining £200,000 will be taxed at the standard 5%.

For instance, for a house that is worth £450,000, Stamp Duty will be exempt for the first £300,000. For the remaining £150,000 the standard 5% will apply. When you calculate the savings, under the old system, first-time buyers would have to pay £12,500 in Stamp Duty on this £450,000 property. Under the new system new home owners will pay just £7,500 for the same house.

The Importance of SDLT

Stamp duty on land and buildings currently raises in the region of 6 billion of revenue. While nowadays new taxes are introduced to make the tax system fairer, the purpose of every tax is to raise additional revenue for the state. SDLS is no different, it was introduced to raise money on equivalent land transitions. This has huge practical importance because it underlies every provision of the tax.

Paying your SDLT

Stamp Duty is paid to Her Majesty's Revenue and Customs (HMRC) department. After the completion of every property purchase you have to send a SDLT return to HMRC. You must then pay the tax due 30 days from the effective date of the transaction. Luckily there are no penalties for late payment of SDLT, however, you will be liable to pay interest from the due date up to the payment date

Penalties for late filing:

• If you file within 3 months from the due date you are liable to pay a fixed penalty £100.
• If you file between 3 and 12 months from the due date you are liable fixed penalty £200.
• If you file more than 12 months from the due date you are liable for a penalty up to 100% in addition to the fixed penalty.

Exemptions to Stamp Duty

• Properties that are registered to companies and cost more than £500,000 have a bases SDLT rate of 15%
• A relief from stamp duty may be available for a landlord who wants to buy property and is a ‘Registered Social Landlord’
• Zero-carbon homes under £500,000 are relieved from SDLT. For zero-carbon homes that cost over £500,000 get a reduced stamp duty by £15,000
• Charities buying property for charitable purposes get an exemption from SDLT.
• Individuals with ‘Right to Buy’ transactions may be eligible for SDLT discounts

Final Words

If you are taking help from a a solicitor, agent or conveyancer to complete your purchase, they will usually file your return and on the final day pay the tax on your behalf. However, keep in mind that they will charge a small fee for their services which they will add to the total amount charged to you at the end.

If you are taking these transaction through on your own, you will be responsible to file the return and pay directly to HMRC the taxes owed. This whole process can seem daunting, and your primary concern will be to not over/under pay. However, don’t be disheartened, take your time and consider your options carefully. This process isn’t a big a deal once you get into it, it shouldn’t be a hurdle in the property buying process.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.