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A Guide To Stamp Duty Land Tax

If you’re thinking of buying a house, Stamp Duty Land Tax (SDLT) could be one of the major costs that you need to consider.

Who Pays Stamp Duty Land Tax (SDLT)

Stamp Duty Land Tax (SDLT) is a tax on properties payable on all residential properties over £125,000, and non-residential land and properties over £150,000 in England and Northern Ireland.

Your conveyancer will submit the Stamp Duty Land Tax return on completion of your purchase and will pay the tax due to HMRC on your behalf. Only those buying a property pay Stamp Duty Land Tax.

Stamp Duty Land Tax rates are dependent on the price of the property purchased and are organised into categories. There are different rates if you are buying a second home or a buy-to-let property and in most cases, first time buyers are exempt from paying Stamp Duty Land Tax.

Are Stamp Duty Land Tax (SDLT) costs the same throughout the UK?

Stamp Duty Land Tax is only payable in England and Northern Ireland. In Scotland, you must pay something called Land and Buildings Transaction Tax, while in Wales it’s the Land Transaction Tax.

Stamp Duty Land Tax for First Time Buyers

From November 2017, first time buyers became exempt from Stamp Duty Land Tax on properties up to £300,000. If they buy a property up to £500,000 they will pay no Stamp Duty Land Tax on the first £300,000 and only pay on the remaining amount.

What are the conditions for First Time Buyers Relief?

The main conditions are as follows:

  • Any buyer must not have owned a residential property before in the UK or anywhere else in the world. If the buyer, or both if more than one buyer, has owned a property before then the relief will not apply.
  • The property must either be used as a main residence or there must be a clear intention to do so. This means that Buy to Let properties are excluded from this relief.
  • No third party should have an ownership in the property. Therefore, if parents have contributed they should not have ownership via a Deed of Trust.
  • If you have previously inherited a property and subsequently disposed of it, because you owned this property you are not a First Time Buyer.

Stamp Duty Land Tax for Second Homes

Stamp Duty Land Tax for second home purchases has risen substantially from April 2016. Second homes will attract an additional surcharge even if they are not let out. With a much lower starting threshold of £40,000, most second home purchases now attract an additional 3% stamp duty tax.

The higher rates of Stamp Duty Land Tax should not apply if someone decides to move house. Even if someone owns two properties in the short term, they can apply for a refund of the higher Stamp Duty Land Tax rates once they sell what was their previous main residence. Final Stamp Duty Land Tax liability will then be applied at the normal rate.

The Government will allow up to 3 years for the sale of the existing property to allow for any delays or difficulties with the transaction. Stamp Duty Land Tax will initially be charged at the higher rate for the new property, a Stamp Duty Land Tax refund can then be claimed when the old home is sold.

If someone already owns more than one property, and they sell their main residence, they won’t have to pay the 3% Stamp Duty Land Tax surcharge if they buy a new main residence within 3 years.

Are There Any Exemptions to Stamp Duty Land Tax?

There are certain situations where a transaction may be exempt from Stamp Duty Land Tax, such as:

  • where no money or other payment changes hands for a land or property transfer
  • where the property is inherited under a Will
  • property is transferred because of divorce or dissolution of a civil partnership
  • where a freehold property is purchased for less than £40,000
  • where you are a first-time buyer purchasing a property with a value of £300,000 or less
  • upon the purchase or assignment of a lease of 7 years or more, so long as the premium is less than £40,000 and the annual rent is less than £1,000
  • upon the purchase or assignment of a lease of less than 7 years, as long as the amount paid is less than the residential or non-residential Stamp Duty Land Tax threshold

How much Stamp Duty Land Tax do you pay?

You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England and Northern Ireland. In Scotland, you must pay Land and Buildings Transaction Tax, while in Wales it’s the Land Transaction Tax.

How much Stamp Duty or Land Tax you pay depends on a number of factors such as if you are a first-time buyer or if the property is a buy to let/2nd home.

You can calculate the amount you will need to pay by using the following calculators:

Stamp Duty Land Tax calculator (England and Northern Ireland)

Land and Buildings Transaction Tax calculator (Scotland)

Land Transaction Tax calculator (Wales)

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