You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over the prescribed figure set by the Government in England and Northern Ireland. There are some notable exceptions:
- First Time Buyers have a different SDLT ‘threshold’ figure to existing property owners. Presently there are different thresholds for First Time Buyers to pay SDLT, depending upon:
- whether the property is inside or outside of London.
- If a first-time buyer is buying a property below the first-time buyer relief threshold.
- If there is more than one buyer in the transaction and none of the buyers HAS previously or currently still owns an interest in a property anywhere in the world.
- If you already own a property, are a Company client buying a property, or are a non-UK resident different, higher rates of SDLT are charged.
The tax is different if the property or land is in Wales, where Land Transaction Tax is payable if the purchase of a property there, completed on or after 1 April 2018 and the property is above the threshold figure in place at the date of legal completion. This Blog deals primarily with SDLT. For more information on LTT, see: Land Transaction Tax return guidance: about the transaction [HTML] | GOV.WALES
You pay the SDLT (provided the consideration is above the SDLT threshold in place upon the date of legal completion and there are no exemptions or reliefs available) when you:
- buy a freehold property.
- buy a new or existing leasehold property. (Supplemental rules exist in relation to Leasehold Properties)
- buy a property through a shared ownership scheme
- transfer land or property in exchange for payment, or for something that is considered to be of ‘moneys worth’ for example if you assume full or partial liability under an existing mortgage.
You will not have to pay SDLT if the transaction involves the transfer an interest in land or property to your partner as part of an agreement or court order because you are either:
• divorcing or
• dissolving a civil partnership
This exception also applies if the owners either:
• annul their marriage
• legally separate
If joint owners are unmarried and are not in a civil partnership, when they transfer an interest in land or property from one joint owner to another, then you may have to pay SDLT. Similarly, this may be applicable when property is transferred from a sole owner to joint names.
An SDLT return is not required if the consideration in money or ‘money’s worth’ is £40,000 or less.
Where a transaction is ‘notifiable’ to HMRC, whether or not SDLT or LTT is payable, an SDLT return must be sent to HMRC (and any tax due must be paid) within 14 days of completion.
Thresholds change often and the government website should be checked for the thresholds applicable on the day of legal completion.
Clients can use the SDLT calculator or check the higher rates to work out how much SDLT they may need to pay.*
Higher rates for additional properties
A client may have to pay 3% in SDLT, in addition to current SDLT rates if, upon completion of the current transaction, that owner will have a major interest in more than one dwelling.
If you’re replacing your main residence
Clients will not pay the extra 3% SDLT if the property they are buying is replacing their main residence and that has already been sold or completes simultaneously with the purchase of a replacement property. If a property owner has not yet sold their main residence on the day they complete their new purchase, they will have to pay SDLT at the higher rate.
In these situations however, property owners can apply for a refund of the Higher Rate SDLT paid if they sell their previous main home within the next 36 months.
Rates if you’re not a UK resident.
If a client is not present in the UK for at least 183 days (6 months) during the 12 months before completion of a property purchase, they are ‘not a UK resident’ for the purposes of SDLT.
Rates if a client is not a UK resident.
Clients who are classed as not being a UK resident for SDLT purposes will usually pay a 2% surcharge if they are buying a residential property in England or Northern Ireland. However, if a client, who is not a UK resident is buying the property with someone (spouse or civil partner) who is a UK resident, then both will be treated as UK residents for the purpose of SDLT for the surcharge.
Special rates
There are different SDLT rules and rate calculations for other transactions, including but not limited to:
- corporate bodies
- people buying 6 or more residential properties in one transaction
- shared ownership properties – often the First Buyer can elect to pay SDLT on the full market value rather than the value of the share in the property they are buying.
- multiple purchases or transfers between the same buyer and seller (‘linked purchases’)
- companies and trusts buying residential property
- Non-residential and mixed land and property.
- Properties with a “Granny Annex”
*On the above specialised property transactions, independent fiscal advice should be obtained on any SDLT liability from a suitably qualified tax expert.