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.
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 were implemented in April 2016, meaning that anyone planning to purchase additional property including buy-to-lets and second homes, had to pay an additional 3% of the purchase price in stamp duty.
The additional charge applies above the current SDLT rates. For example, anyone buying a £250,000 second home or buy-to-let 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 these rates:
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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