When buying a property, the biggest tax cost will be Stamp Duty Land Tax (SDLT).
Tax rates such as Stamp Duty Land Tax often change, so before buying a residential property, you should familiarise yourself with Stamp Duty rates, reliefs and exemptions and calculate how much you need to pay.
In this blog, well explain all you need to know about Stamp Duty rates for various scenarios.
Lets start with the basics of what Stamp Duty Land Tax is.
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.
You pay the tax when you:
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:
The rules are a little more complicated around how much Stamp Duty you will pay as there are different rules for residential property in England and Northern Ireland and it will depend on whether the land or property will be used as a residential property, non-residential property or mixed-use property. It will also depend on whether you are eligible for any reliefs or exemptions.
There are also different rates of SDLT if you are one of the following:
Below are the normal Stamp Duty rates for 2023 if you are purchasing a main residence in England and Northern Ireland.
Property price Stamp Duty rate
First-time buyers may qualify for first-time buyer 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.
Here are the first-time buyers rates of Stamp Duty:
Property price Stamp Duty rate:
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.
The stamp duty land tax (SDLT) higher rates do not apply where a transaction is the replacement of an individual’s only or main residence.
There is no definition of a main residence in the SDLT legislation and unlike capital gains tax it is not possible to nominate which property is a main residence.
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:
You will be exempt from the higher rates if you are replacing your main home, which is being sold. If, at the end of the day of the transaction, an individual owns 2 or more properties and has not replaced their main residence, the higher rates will apply.
You can apply for a repayment of the higher rates of SDLT for additional properties if you’ve sold what was previously your main home if you’re either the:
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.
The SDLT surcharge paid on a property can be claimed for a refund where:
All the above criteria for an SDLT refund must be met.
Find out more about Stamp Duty Land Tax refunds here.
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.
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.
As long as you lived in your old home for 3 years leading up to the purchase of the new home, then although you will be liable to pay the higher rate SDLT, assuming that you sell that first home within 3 years of your purchase of the new one, you may be able to claim back some or all of the additional SDLT that was paid.
You cannot get a refund if:
Find out more on how to claim.
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.
There are different rules for trusts, partnerships and companies, so read out blog here to find out more.
Also read our blog on multiple dwellings relief here.
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.
Once your property purchase is complete, the stamp duty payable needs to be paid within 14 days. If the purchase price was over £40,000, an SDLT Return must be submitted to HMRC , even if no Stamp Duty is payable within 14 days of completion. Your solicitor will usually complete the SDLT Return for you and arrange the payment.
If HMRC receive your SDLT return late or you do not pay the SDLT that you owe on time, you will be liable to a penalty from HMRC
If HMRC does not receive the land transaction return within 14 days of the effective date, you’ll automatically be charged a £100 penalty. If your return is more than 3 months late you’ll be charged a penalty of £200. If you pay the tax late, you’ll also be charged interest.
If your land transaction return is more than a year late, you may be liable to a tax¬-based penalty, which can be up to the amount of SDLT due on the land transaction return.
If you are charged a penalty, you will receive a penalty notice from HMRC informing you of the penalty. The penalty should be paid within 30 days of the notice.
If you disagree with a penalty notice, you can write to HMRC and appeal it within 30 days of the date of the formal penalty notice. You need to explain why you disagree with the penalty and send supporting documentation.
You must pay any SDLT due within 14 days after the effective date of the transaction. If you pay the tax late, youll pay interest from the day after you should have paid it until the day you pay it.
If you do not pay, HMRC will write to both you and your accountant to tell you how much tax you’ve underpaid and how much interest we’ve charged you so far. You should pay the tax and the interest as soon as possible.
You cannot appeal against a late payment interest charge. Interest charged on tax is not a penalty so you cannot appeal against it. It’s a charge to compensate HMRC for not having the money when we should have, so you must pay it.
There was an SDLT cut announced by the Government on 23 September 2022 and this cut is due to remain in place until 31 March 2025 to support the housing market.
This measure temporarily increases the amount that a purchaser can pay for residential property before they become liable to Stamp Duty Land Tax (SDLT) while maintaining the higher rate of 3% on additional dwellings. It increases the residential nil-rate tax threshold from £125,000 to £250,000.
The nil-rate threshold for First Time Buyers’ Relief is also temporarily increased from £300,000 to £425,000 and the maximum property value that is eligible for First Time Buyers’ Relief is increased to £625,000.
The measure means that all purchasers of residential property bought between 23 September 2022 and 31 March 2025 will pay less or no SDLT.
You pay Stamp Duty Land Tax (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.
Find out more here.
There may be circumstances where Stamp Duty may not be payable. Some examples might include:
Seek advice from a professional tax advisor.
Navigating the complexities of property taxes can be daunting, especially when it comes to understanding the rules, reliefs and exemptions of 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 call our team on 03300 886 686, or email on enquiry@dnsaccountants.co.uk.
Any questions? Schedule a call with one of our experts.
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.
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