Stamp Duty Land Tax

Here at Askews Legal LLP we have a team of dedicated residential conveyancing specialists to assist you with all your conveyancing needs. This article provides a brief explanation about Stamp Duty and how it works. Remember you should always obtain specialist tax advice from a qualified expert, such as an accountant or a specialist tax solicitor.

Stamp Duty Land Tax, more commonly referred to as ‘SDLT’ is tax payable to HMRC upon completion of the purchase of property in England.

There are a number of factors you should bear in mind when purchasing a residential property and factoring in SDLT:

For residential properties SDLT is charged to a purchaser when a property exceeds the current threshold value of £125,000.00 and is payable within 14 days of completion. The rate then varies incrementally. A property is deemed to be chargeable at the residential rate if it has the construction of walls; if you purchase a plot with no construction or just a foundation, it is charged at a lower non-residential rate. Purchasing property which at the time of completion remains dilapidated and inhabitable, falls within the scope of the lower rate SDLT also.

Stamp Duty rates vary for somebody buying their first property compared to somebody who already owns one or more properties and buys subsequent properties, the rates also vary depending on the purpose of the property at the time of purchase (own residence/buy to let – which all attract a varied rate of SDLT). First Time Buyer(s) (FTB) are eligible to SDLT relief in England up to the consideration of £300,000.00, however if this individual purchases a property jointly with an existing property owner, they would forfeit their eligibility for this relief and be liable to SDLT at the higher rate with the joint owner.

When buying a second property to replace your first property, you should bear in mind that if you end up selling the first home after the completion of your new home takes place, you will be charged SDLT at the higher rate (3% surcharge). You are deemed to own more than one property at that given time and so pay the price for it. This can however be reclaimed from HMRC, should you come to sell the first property within 3 years of the new purchase. You have up to 1 year after completion to submit a claim which would, if completed successfully, refund you for the 3% surcharge that was previously applied.

Even where individuals are buying property alone but are married or in a civil partnership, they are susceptible to higher rate SDLT also. Similarly many individuals face the scenario where upon the breakdown of a marriage one party leaves the matrimonial home and the other remains in the home, if the party departing retains an interest in the matrimonial home, they are subject to the 3% surcharge, however if not and they wish to buy a property for themselves before the divorce completes, they can part of any interest via a Consent Order sealed by the courts and in turn, avoid the surcharge.
Rates also vary where leasehold properties bought have an annual rent payable as well as the purchase price, both must be declared in order to calculate the correct amount of tax payable.

Another factor to bear in mind is when you buy multiple dwellings from one seller, these can be considered as linked transactions, depending on how the conveyance is dealt with, this would render the purchaser liable to SDLT at a higher rate, especially where the cumulative consideration is in excess of the £1.5 million threshold, as it would be taxable at a rate of 15%. Unlinking these transactions and buying each individually would considerably reduce the SDLT payable for each.

Where investors buy properties in excess of 6 dwellings, they would be taxed at the non residential rate.

You can complete SDLT calculations to get an idea of rates, using this Stamp Duty Calculator on to the Government website.

If you are thinking of selling or buying a property, please contact our highly experienced residential conveyancing team at Askews Legal LLP in Coventry. You can also use our conveyancing calculator for an instant no obligation conveyancing quote.