You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England, Wales and Northern Ireland.
The current SDLT threshold is £125,000 for residential properties and £150,000 for non-residential land and properties.
How much SDLT will I need to pay?
How much you pay depends on whether the land or property is:
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 £125,000, you also pay SDLT of 1% on the portion over £125,000 – unless you buy an existing (‘assigned’) lease.
How much SDLT do I need to pay if I am a First-Time Buyer?
There are different rules if you’re buying your first home. You get a discount (relief) that means you pay less or possibly no tax if:
- you complete your purchase on or after 22 November 2017,
- the purchase price is £500,000 or less, and
- you, and anyone else you’re buying with, are first-time buyers
You have to pay Stamp Duty Land Tax when you:
- buy a freehold property,
- buy a new or existing leasehold,
- buy a property through a shared ownership scheme, or
- are transferred land or property in exchange for payment, e.g. you take on a mortgage or buy a share in a house
What are the higher rates if I own additional properties?
You’ll usually have to pay 3% on top of the normal SDLT rates if you are buying a new residential property which results in you owning more than one property.
You won’t pay the extra 3% SDLT if the property you’re buying is replacing your main residence and that has already been sold.
If there’s a delay selling your main residence and it hasn’t been sold on the day you complete your new purchase:
- you’ll have to pay higher rates because you own 2 properties
- you may be able to get a refund if you sell your previous main home within 36 months
Please note that there are special rules if you own property with someone else or already own a property outside England, Wales and Northern Ireland.
Ownership of Property
> Spouses and civil partners
You may be viewed as the owner of a property if it is owned by your spouse or civil partner in the UK or anywhere else in the world.
This means if one of you already owns a property and the other person purchases another property, the purchase will be charged at the higher rates.
Spouses or civil partners that are permanently separated won’t be treated in this way.
You’ll be treated as owning a property if you receive all the income from it and the proceeds from its sale even if you’re not the legal owner.
The beneficiary of a bare trust will be treated as the purchaser of a property.
The beneficiary will also be treated as the purchaser if the trust holds property and the beneficiary is entitled to:
- occupy the property for life, or
- receive income from the property
When the beneficiary is under 18, the child’s parents are treated as the beneficiary.
> Companies and partnerships
Companies have to pay the higher rates when they buy any residential properties that are over £40,000 and aren’t subject to a lease of more than 21 years.
You’ll have to pay the higher rates if your partnership already owns a residential property and you purchase another residential property for your partnership.
You won’t have to pay the higher rates if you buy a property for yourself and your only additional properties are used for your partnership’s trade.
Where a trustee buys a property but a beneficiary doesn’t receive any benefits from that property, the purchase is treated as if it were made by a company rather than an individual.
> Inherited properties
If you inherit half or less of the major interest in a property in the 3 years before you make a purchase, and you don’t already have an additional residential property, you won’t pay the higher rates on that purchase.
How do I pay SDLT and when do I pay it?
You must send an SDLT return to HMRC and pay the tax within 30 days of completion of your transaction.
If you have a solicitor, agent or conveyancer, they will usually file your return and pay the tax on your behalf on the day of completion and add the amount to their fees. They will also claim any relief that you are eligible for, such as if your are a first-time buyer.
Is there a possibility of suffering penalties and interest?
You may be charged penalties and interest if you do not file your return and make your payment within 30 days of completion. There are differently penalty rules depending on when the SDLT return was due to be filed.
*For further information and to discuss your specific circumstances with our conveyancing team, please contact us on 0208 574 2488 to book an initial no obligation free consultation.
Written by our Conveyancing Team.