What is Stamp Duty?

Stamp duty land tax, or SDLT as it is also known is the lump sum tax that anyone buying a property or land has to pay to HM Revenue and Customs (HMRC). The overall rate of tax and amount that you pay varies depending on the value of the property or land you are buying. The stamp duty tax bands also vary if you are buying a second residential or a buy to let property. If you are buying a secondary residential property and you sell your main property within 3 years of paying the higher SDLT it is possible to get a refund from HMRC.

Use our stamp duty calculator and find out how much tax you will pay when buying a main residential or secondary property in England, Wales or Northern Ireland. This calculator uses the latest rates from the stamp duty changes that came into effect in November 2017.

Let us know the value of the property you’re buying, if you’re a first time buyer or if it’s a second home or BTL, then press Calculate.

Once you know how much stamp duty you’ll be paying, speak to our experts and we’ll help you compare 1000’s of mortgage deal from across the market to assess what your next steps are.

When is Stamp Duty paid?

When buying a property over a certain price, stamp duty is payable to the HMRC 14 days from the date of completion or you may risk a fine. Your solicitor or legal adviser should take care of this for you and ensure you don’t miss the deadline. Some buyers prefer to add on the SDLT amount to their mortgage loan. Please speak to your mortgage provider.

What were the major changes to UK Stamp Duty?

Stamp Duty Land Tax (SDLT) is a progressive tax paid when purchasing a freehold, leasehold or shared ownership residential property over £125,000 in England, Northern Ireland and Wales (separate Land and Buildings Transaction Tax in Scotland). New SDLT rates were introduced in 2014’s Autumn Statement, introducing a sliding system based on thresholds and dependent on a property price.

Different SDLT rates and thresholds apply to non-residential property or mixed use land.

Before 2014 a ‘slab structure’ was in place with buyers paying a rate based on the ENTIRE property purchase price. The new rates are now payable only on the PORTION of a property price which falls within each band. As with every tax, there are those who will be better and worse off compared to the previous system.

Stamp Duty Tax Rates as of December 2014 for residential properties purchased by individuals

 

Brackets Rate
£0-£125,000 0%
£125,001-£250k 2%
£250,001-£925k 5%
£925,001-£1.5m 10%
£1.5m+ 12%

 

How to calculate the new Stamp Duty rate

So, if you bought a property for £850,000 you would you pay no stamp duty on the first £125,000, then 2% on £125,000 to £250,000 and 5% above £250,000. (eg:  £800,000 – £250,000 = £600,000 x 0.05 = £30,000 + £2,500 = £32,500).

As the property price increases the rate of pay increases within a certain tax bracket with percentages rising when a higher price threshold is reached. Under the new SDLT property over £925,000 – £1.5m will be taxed at a rate of 10% compared with 5% in 2014..

Buy-to-let and second homes Stamp Duty 2018

From April 2016, property buyers in England and Wales will have to pay an additional 3% on each stamp duty band.

Buy-to-let and second home Stamp Duty tax bands
Brackets Standard rate Buy-to-let/second home rate (1st April 2016)
Up to £125,000 0% 3%
£125,001 – £250,000 2% 5%
£250,001 – £925,000 5% 8%
£925,001 – £1.5m 10% 13%
over £1.5m 12% 15%
Source: HMRC

Can I reduce Stamp Duty?

As stamp duty is only payable on the land purchase, removable fixtures and fittings, or chattels, such as freestanding wardrobes, sofas, fridges, carpets and curtains, are not subject to SDLT and can, therefore, be subtracted from from the total property price. Everything ‘attached’ to property such as light switches technically form part of the property and are subject to SDLT.

If a seller is willing to leave certain chattels, you should agree to pay a reasonable amount between yourself and the vendor and subtract it from the agreed purchase price. This can be executed by a good tax lawyer or conveyancer.

Who pays Stamp Duty?

Stamp Duty is paid by everyone purchasing a residential or non-residential property in England, Northern Ireland and Wales, including overseas buyers, corporate bodies and non natural persons.

Why are these changes taking place?

The consultation states that the higher rates of SDLT on purchases of additional residential properties ‘continue the government’s commitment to supporting home ownership and first time buyers’.

What are the changes to Stamp Duty when buying a UK second home or buy to let in the UK from 1st April 2016?

From the 1st April 2016 anyone purchasing a property in addition to their main home will pay an additional 3% SDLT for the first £125,000 and 5% instead of 2% on the portion between £125,001 and £250,000 and 8% on the amount above £250,001.

For example, if you bought a buy to let property after 1st April, 2016 for £350,000 you would pay 3% on the first £125,000, 5% on £125,001 – £250,000 and 8% on the portion that falls above £250,001.

Calculation:

£125,000 x 0.03 = £3,750

£250,000 – £125,000 x 0.05 = £6,250

£100,000 x 0.08 = £8,000

Total = £18,000

Who pays the higher SDLT?

Under the new proposals, all property owners purchasing an additional property to their main residence in England, Wales and Northern Ireland will be affected by the rise in SDLT. If you already own properties but plan to buy a permanent home to replace another, you are exempt from the paying the higher rate.

If you own two properties on the day of completion of the purchase of your second property but still legally own your first property and plan to sell, you are still obliged to pay the higher rate of SDLT. A refund is available if you sell your former residence property within 36 months.

When applying the higher rates, a small share (50% or less) in a property which has been inherited within the 36 months prior to a transaction will not be considered as an additional property.

What if I own a property abroad and buy a second property in the UK?

Property buyers who own and reside in a property abroad i.e. France, but intend to purchase a second property in the UK are eligible to pay the new SDLT rates.  The definition of “main residence” will be based on fact (where you live) rather than subject to election, which differs from other taxes.

Are any types of properties exempt from this tax?

Yes. Caravans, houseboats, mobile homes and properties under £40,000 are exempt from the higher rate of SDLT. The consultation says, ‘Transactions under £40,000 do not require a tax return to be filed with HMRC and are not subject to the higher rates.’

Potential exemptions

Married couples and civil partners

The consultation states that ‘the government will treat married couples and civil partners living together as one unit’. As such, married couples and civil partners who own one property at the end of the day of a transaction will not pay the higher rates of SDLT. However, if either of them owns more than one residential property both may pay the higher rates when purchasing another property.

Couples who are separated will be treated as “separate entities” in terms of property ownership

Purchasing a property for children

The Treasury outlines different structures of property transaction. If parents purchase a property for their children in their name and already own their home, they are eligble to pay higher SDLT as they will own two properties. However, if parents gift money towards a deposit but do not jointly own the property with their child, higher SDLT does not apply.

Multiple purchases

Large-scale investors will be liable for the additional charge. In the consultation document published after the initial announcement in November 2015, there was an indication that investors buying more than 15 units, or who had a portfolio of more than 15 units, could be exempted from the charge, but the Chancellor decided against this.

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