LayerSlider – Conveyancing 26Jan18 – Base

SDLT & Tax Planning

Our Real Estate and Commercial Property solicitors have an unrivaled level of expertise, knowledge and experience and are market leaders in the implementation of various Tax Planning products for both businesses and individuals.

Tax Planning might be considered as getting the best possible deal available within the law. It is a highly specialised area mainly practiced by a small number of specialised firms of tax consultants and tax barristers in the UK. We have developed close relationships with the majority of these professionals and are able to offer clients a well rounded and complete service.

What is SDLT?

Stamp duty land tax is a tax payable by an individual or business in a transaction involving land. A certain percentage of the purchase is paid to Inland Revenue based on the value of the property as a whole. The greater the value of the property the greater the SDLT paid. Stamp duty land tax can be paid on both residential and non-residential properties and only applies on a purchase over £125,000. After £125,000 the percentage paid is 1% and this rises as far as 7% for purchases over £2,000,000.

Stamp duty land tax is generally charged on the consideration of the property but can also be charged in other ways based on the case and circumstances.

What are the exceptions to SDLT?

There are certain circumstances in which the boundaries of stamp duty land tax are different and an example of this would be properties that are deemed to be located in disadvantaged areas.

There are also circumstances in which land can be completely exempt from SDLT. These circumstances involve the ownership of land being transferred with no money changing hands and therefore removing the need for taxation. All cases are different but in most instances the following cases would be exempt

•  The transfer of land as a gift

•  The transfer of property left as part of Will

•  The transfer of land as part of a divorce settlement

•  The transfer of land to a charity

•  The transfer of land within a group of companies

In these scenarios there is no need to notify HMRC of any changes to the arrangement.

Changes to SDLT for multi-properties

From 1st April 2016, anyone planning to purchase additional property, including buy-to-lets and second homes, will have to pay an additional 3% of the purchase price in stamp duty.

The additional charge applies above the current SDLT rates. For illustration purposes, anyone buying a £250,000 second home or buy-to-let before April pays stamp duty of £2,500 ie: a rate of 0% on the first £125,000 and 2% on the next £125,000. However, from April onwards the purchaser will have to pay 3% on the first £125,000 and 5% on the next £125,000, meaning that they will have to pay SDLT of £10,000 in total. The table below illustrates the new rates compared to the existing rates:

sdlt table

Further implications will apply for landlords or anyone planning to purchase a second property, including:

If you buy a second property, you will always have to pay the higher rate of Stamp Duty, even if you plan to live in it or rent out your old one. It will also not be possible to ‘flip’ your home anymore as the Treasury is now enforcing strict definitions of a “main residence” when it comes to the extra SDLT charge.

Property owned globally will also determine whether a property purchased in England, Wales or Northern Ireland is an additional property. It will also include a foreign homeowner purchasing a property in the UK, or a UK resident with a holiday home.

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