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Stamp Duty Land Tax Explained

What is Stamp Duty Land Tax?

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 rates of SDLT will apply to any additional properties, including Buy To Let and second homes purchased that complete on or after 1st April 2016.

The changes

  • SDLT charged at 3% to support home ownership.
  • Rates to be applied to most purchases of additional residential properties.
  • Rates to be applied to purchases of additional properties by companies.
  • First time buyers, or home movers will be unaffected by these changes.

Who’s affected?

Anyone purchasing an additional property is potentially affected, married couples and civil partners living together will be classed as one unit. This means that any properties owned by either partner will be taken into account when an additional property is being purchased. Therefore, individuals could be affected if they wish to purchase a property but their spouse or partner already has one.

What are the Tax Bands?

Band Standard SDLT rates Additional Property SDLT rates
£0*-£125,000 0% 3%

£125,001-£250,000

2% 5%

£250,001 - £925,000

5% 8%
£925,000 - £1,500,000 10% 13%
£1,500,000 + 12% 15%

*Transactions under £40,000 do not require a tax return to be filed with HMRC and are not subject to the higher rates.

When is Stamp Duty paid?

You must pay stamp duty to the HMRC 30 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.

Calculate your own potential Stamp Duty

Click on the image below to go to the HMRC official Stamp Duty Calculator:

Other cases:

  • Employer provided accommodation - Work related accommodation which is provided and owned by an employer does not count when considering whether an individual is purchasing an additional property or not.
  • Furnished holiday lets - The government proposes that properties bought as furnished holiday lets should be treated in the same way as all other residential properties – if the property is purchased as an additional property the higher rates will apply.
  • Timeshare properties - In most instances, timeshare agreements are not chargeable for SDLT purposes and therefore the higher rates will not apply to purchases of timeshares.
  • Caravans, mobile homes and boat purchases - The ownership of a caravan, mobile home or houseboat will not be taken into account when determining whether a new property purchase by an individual is an additional property.
  • Social landlords - The SDLT system currently includes exemptions for some residential property purchases made by charities and registered social landlords

 

If a sale of a main residence has not completed at the time of the purchase the higher rate will apply, although a refund of any additional SDLT can be claimed for as long as the main residence is sold within 36 months.