Stamp Duty Land Tax

If you are considering purchasing a property, then it is important to remember to consider the stamp duty land tax (“SDLT”) that may be payable. Mary Ashley (barrister at Old Square Tax Chambers) covers the basics of SDLT as well as some reliefs that are worth considering.

To instruct Mary Ashley regarding your own tax matter, simply make contact here.

Most of the issues which Mary deals with regarding SDLT on a regular basis involve answering complex questions around the operation of specific provisions or specific reliefs. That being said, it is never hurts to consider the basic building blocks of SDLT to help you decide whether additional advice should be taken in your circumstances to alleviate your SDLT liability.

What is Stamp Duty Land Tax?

SDLT is a tax charged in England and Northern Ireland on the purchase of a “chargeable interest”. Most commonly this will be the purchase of a freehold in land or the purchase of a leasehold, but chargeable interests are not limited to these rights over land. If there is a purchase of almost any right over land, SDLT should be considered (s 48 FA 2003).

SDLT is distinguished from the Land and Buildings Transaction Tax (“LBTT”) which applies in Scotland and the Wales Land Transaction Tax which applies if the sale was completed on or after 1 April 2018.

Who pays SDLT?

The purchaser of the chargeable interest will pay the SDLT as opposed to the seller. SDLT is not payable on properties worth less than £125,000. Care should be taken even if no SDLT is ultimately payable as sometimes returns need to be filed even though no SDLT is payable.

When is SDLT payable?

It is necessary to file an SDLT return and pay any SDLT due within 14 days of the effective date of the transaction. In most circumstances this will be the date that the purchase is completed though in more complex transactions the date the clock starts running could be sooner.

How much SDLT do I need to pay?

The amount of SDLT payable depends upon the chargeable consideration and the applicable rates.

There are two tables of rates which would apply to most transactions: the residential rates and the non-residential / mixed use rates (s 55 FA 2003). As of May 2020, the rates are as follows:

TABLE A: RESIDENTIAL

Part of relevant considerationRate
So much as does not exceed £125,0000%
So much as exceeds £125,000 but does not exceed £250,0002%
So much as exceeds £250,000 but does not exceed £925,0005%
So much as exceeds £925,000 but does not exceed £1,500,00010%
The remainder (if any)12%

TABLE B: NON-RESIDENTIAL MIXED

Relevant considerationPercentage

So much as does not exceed £150,000
0%

So much as exceeds £150,000 but does not exceed £250,000
2%
The remainder (if any)5%

What SDLT is chargeable on second homes?

When an individual purchases a second home, then there are additional rates (the “higher rates”) which may be chargeable. The higher rates are as follows:

TABLE A: RESIDENTIAL

Relevant considerationPercentage
So much as does not exceed £125,000
3%

So much as exceeds £125,000 but does not exceed £250,000
5%

So much as exceeds £250,000 but does not exceed £925,000
8%

So much as exceeds £925,000 but does not exceed £1,500,000
13%
The remainder (if any)
15%

The conditions for the higher rates to apply to an individual are as follows:

  1. The main subject-matter of the transaction must consist of a major interest in a single dwelling. This will be the case where a person is buying a second home.
  2. The chargeable consideration for the transaction must be more than £40,000.
  3. The second home must not be subject to a long lease.
  4. At the time of purchasing the second home, the individual owns another home (anywhere in the world) worth more than £40,000 and not subject to a long lease.
  5. The second home must not be a replacement for the purchaser’s only or main residence.

If you are purchasing a property that is a replacement of a main residence, but you are not able to sell your main residence prior to purchasing the new property, then provided certain conditions are met and the sale is within three years of the purchase, it may be possible to claim a refund.

If you own multiple properties, but have sold what you would consider was your main residence (whether or not that is within the UK) within three years of purchasing this additional property which you intend will be your main residence, advice should be taken to establish whether it is a replacement of your main residence.

Are there other circumstances where special rates can apply?

From 22 November 2017, The “higher rates” that are applicable on the purchase of second home can also apply where a non-natural person purchases a single dwelling worth more than £40,000.

In addition to the “higher rates” if the purchaser is a non-natural person and the transaction contains a “high threshold interest”, a single dwelling with chargeable consideration of more than £500,000, then the amount of tax chargeable will be 15%.

Where the higher rates are being considered, it is always helpful to take advice to ensure that they do in fact apply to your specific circumstances. I have found in the past that clients are concerned that they will apply, but on closer examination it becomes evident that not all of the conditions are in fact met or it may be possible to come within a relief.

What SDLT reliefs are available?

There are many reliefs available for SDLT. Here I will briefly outline first-time buyers relief and multiple dwellings relief as they are the most likely reliefs to apply to the majority of situations. In addition, there are many other reliefs to consider including, but not limited to, sub-sale relief, partnership relief, charities relief etc…

Relief for first-time buyers

From 22 November 2017, a first-time buyer in England or Northern Ireland can pay a reduced amount of SDLT. In short, to qualify for the relief, the purchaser of a single dwelling must be a first-time buyer who intends to occupy the purchased dwelling as their only or main residence. If there is more than one purchaser, then each purchaser must be a first-time buyer.

A first-time buyer is an individual or individuals who have never owned an interest in a residential property in the UK or anywhere else in the world.

The rate table for first time buyers is as follows:

Portion of considerationRate for first time buyers
Up to £125,000
0%
Over £125,000 and up to £250,0000%
Over £250,000 and up to £300,0000%
Over £300,000 and up to £500,0005%

The relief must be claimed in the SDLT return.

Multiple Dwellings Relief

In circumstances where an individual has a land transaction which consists of an interest in at least two dwellings or a series of linked transactions which each contain a dwelling or dwellings then multiple dwellings relief may apply. This is particularly relevant to consider where a property contains a granny annex.

The relief operates by essentially averaging the value of the dwellings and applying the rate relevant to the average to the total. This can result in a significant tax saving. Whether you have more than one dwelling is a question of fact and is usually straightforward to answer, but if it is unclear, then it is worth taking advice to see if the relief may apply.

This relief must also be claimed.

If you would like to discuss SDLT further or you require legal assistance with an SDLT issue, SDLT refund or SDLT claim for relief, you can instruct Mary here.

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