Stamp Duty Land Tax (SDLT) is a government tax on purchases of land over a certain price in England, Wales & Northern Ireland. If the purchase price of your property is over the threshold then Stamp Duty Land Tax becomes chargeable. The current SDLT threshold is £125,000 for residential properties and £150,000 for non-residential land and properties. Therefore if you are purchasing a property that is over this threshold then you will have to pay Stamp Duty after completion.
The way the tax amount is calculated is based on band percentage system, calculated by the purchase price of the property, as below:
|Property or lease premium or transfer value||SDLT rate|
|Up to £125,000||Zero|
|The next £125,000 (the portion from £125,001 to £250,000)||2%|
|The next £675,000 (the portion from £250,001 to £925,000)||5%|
|The next £575,000 (the portion from £925,001 to £1.5 million)||10%|
|The remaining amount (the portion above £1.5 million)||12%|
If you buy a house for £275,000, the SDLT you owe is calculated as follows:
- 0% on the first £125,000 = £0
- 2% on the next £125,000 = £2,500
- 5% on the final £25,000 = £1,250
- Total SDLT = £3,750
The amount of tax payable is based on the table as above, for an exact figure you can use the government’s online calculator – https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/holding.
Second Property Policy
In April this year the government announced a new policy for Stamp Duty, in that if you were to buy a second property with the intention of letting it, or using it as a holiday home; then a new, increased Stamp Duty band tariff would apply. Secondly to this, the minimum purchase price threshold was removed; therefore any second home property is liable to SDLT, regardless of price.
If you are looking to purchase a property as an investment or as a second home then an increased Stamp Duty Tax will apply:
|Up to £125,000||3%|
|Over £125,000 and up to £250,000||5%|
|Over £250,000 and up to £925,000||8%|
|Over £925,000 and up to £1.5 million||13%|
|Over £1.5 million||15%|
Main Residence Clause
You won’t pay the higher SDLT rates if the property you’re buying is replacing your main residence and that main residence has already been sold.
If you buy a new main residence but the sale for your previous main residence is delayed you’ll pay the higher rates as you own 2 properties. But you can get a refund for the amount above the normal SDLT rates if you sell your previous main residence within 3 years.
Transfer of Equity
Not many people may be aware, however if you intend to transfer a property into a different name or to remove a name; and this involves money, then SDLT may also be chargeable. The amount of tax charged (or indeed if it is chargeable) is worked out on the basis of two things:
- If the Transfer is Subject to the Transfer of Money
- If there is a current mortgage on the Property.
If the transfer of the property is subject to a price, providing the amount is less than the £125,000.00 threshold then SDLT will not be triggered. However if there is a mortgage currently on the property that is being removed and repaid, and the property is going from two names to one, then half of the mortgage redemption amount (amount required to pay off the mortgage) is also consideration, therefore if this amount is over £125,000.00. Or this amount plus the transfer price equals a figure greater than £125,000.00, SDLT will be chargeable.
If the property is a second home or an investment property, then the higher rates of SDLT will also apply.
It is very important to ensure that SDLT is considered correctly prior to completion, because you have exactly thirty days from the date of completion to submit and pay the Stamp Duty, otherwise HMRC will begin to impose interest penalty’s and if left unpaid these can mount up.
If you have any questions regarding the payment of Stamp Duty or if you are currently purchasing a property through Thursfields and would like further information regarding SDLT, please contact our experienced Residential Property Team who will happily advise you.
This is based on purchases of residential property in England. For Stamp Duty liability in Wales please contact us for further advice.