Stamp Duty Land Tax (SDLT) on Residential Property

• Posted onAugust 18, 2024

Understanding Stamp Duty Land Tax (SDLT) is essential when purchasing residential property. Our concise guide covers current rates, upcoming changes, and how they may affect your property transactions. Stay informed to make well-informed decisions in the property market.

What is Stamp Duty Land Tax (SDLT)?

Stamp duty is a tax levied on transactions of land.  This can be payable on residential or commercial land but we will deal with residential transactions only here.

You may need to pay SDLT when you purchase a property or perhaps if you purchase a share of property, for instance if you and your partner separate and you decide to buy out the other party.

Is Stamp Duty Land Tax (SDLT) payable on every purchase of property?

SDLT is calculated on the ‘chargeable consideration’ given for land.  Where you are purchasing your new home, this will be the price you pay for the property.

Where you are transferring property between unmarried couples for example, the SDLT is still based on the chargeable consideration, which will be the amount one party pays to the other for their share in the property, but it could also take into account the amount payable on any remaining mortgage, if it has been agreed that one party will take over the existing mortgage debt.

When purchasing a new build property, chargeable consideration may include the purchase price but also any extras you are paying the developer for fixtures and fittings, for instance, a fitted kitchen.  The developer should disclose the cost of any extras clearly to your Conveyancer so that your Conveyancer may calculate the amount of your tax liability accurately.

SDLT is only payable where the chargeable consideration exceeds £250,000 (assuming the purchase is by a UK resident who owns just one property).  A transaction is notifiable to H M Revenue and Customs (HMRC) where the chargeable consideration exceeds £40,000.

How much is Stamp Duty Land Tax (SDLT)?

There is a straightforward online calculator you can use to calculate the amount of SDLT you may be liable for which can be found here. Standard rates of SDLT are as follows:

• Currently, you will not pay any SDLT if you are purchasing property with a value of £250,000 or less.
• The next £675,000 (the portion from £250,001 to £925,000) will be charged at a rate of 5%.
• The next £575,000 (the portion from £925,001 to £1.5 million) will be charged at a rate of 10%.
• The remaining amount (the portion above £1.5 million) will be charged at a rate of 12%.

The amount of SDLT you are liable for may also depend on your personal circumstances.

If you or your spouse/civil partner (regardless if you are purchasing the property jointly or not) are a non-UK resident, you may be liable to pay a surcharge.

If you or your spouse/civil partner (regardless if you are purchasing the property jointly or not) or if you or your spouse/civil partner have children who are minors who own another property or have a significant share in any other residential property anywhere in the world, you may be liable to pay a higher rate of SDLT.

The SDLT calculator will ask questions as to residency status and additional property owned and then it will add any additional rates payable to the total calculation.

If you are purchasing residential property in the name of a company, you will be liable to pay the higher rate of SDLT.

Higher rates of SDLT are as follows:

• If you are purchasing a property with a value of £250,000 or less you will be charged at a rate of 3% of the purchase price.
• The next £675,000 (the portion from £250,001 to £925,000) will be charged at a rate of 8%.
• The next £575,000 (the portion from £925,001 to £1.5 million) will be charged at a rate of 13%.
• The remaining amount (the portion above £1.5 million) will be charged at a rate of 15%.

Government can make changes to SDLT liability at any time so it is important to use the Government’s own SDLT calculator to ensure the calculation is correct.

First time buyer tax relief

If you are a first time buyer, i.e. you, your spouse/civil partner/any minor children have never owned any property or significant share in property anywhere in the world, you could benefit from this type of relief.

First time buyers will pay no SDLT on a purchase of property up to £425,000.  Do note that the purchase price cannot exceed £625,000 otherwise the relief will not apply.

Also note that certain criteria must be met to be considered a first time buyer:

• The property you are buying must be residential;
• You must be an individual, i.e. not a company;
• Every purchaser must be a first time buyer, meaning, you must not, either alone or jointly with others, have previously owned a residential property (including by way of inheritance or gift);
• You must intend to occupy the property as your only or main residence.

Other circumstances where you may not be liable for SDLT

If property is being transferred due to divorce or dissolution of a civil partnership, SDLT is not payable, nor is the transaction notifiable to HMRC.

If property is transferred to you in a will, even where there is an existing mortgage on the property, you will not pay any SDLT, nor is the transaction notifiable to HMRC.

Purchasing an additional property

If you are purchasing an additional property, you will pay a higher rate of SDLT.  This will usually be 3% on top of the standard rate.

If, after you have purchased your additional property, you then sell your other property, meaning you then only own one property, you can claim back the additional tax you have paid.  Do note however that the property must be sold within 3 years of the completion date of your additional property.

How do I pay Stamp Duty Land Tax (SDLT)?

If you are purchasing property or transferring a share of property, you will need to instruct a Conveyancer to act for you.  Your Conveyancer will provide you with forms relating to SDLT, which you will need to complete in full.  Your Conveyancer will take responsibility for submitting your SDLT return for you, which is sent to HMRC once your transaction has completed.  At that time, your Conveyancer will also pay any tax due to HMRC, having collected this sum from you prior to or on completion of your transaction.

If no SDLT is payable but the chargeable consideration is over £40,000, your transaction will still be notifiable to HMRC and your Conveyancer will need to submit the SDLT return on your behalf.

Anything else I need to know?

The information provided here deals with straightforward transactions where the chargeable consideration is easy to calculate.  The rules and guidance on SDLT provided by the Government are extensive and complicated. Where a transaction is more complicated, it may be necessary for your Conveyancer to refer you to a tax expert for advice. A tax expert will need to provide your Conveyancer with written advice regarding their calculation before the SDLT return can be submitted.

Stamp Duty Land Tax (SDLT) in the future

It is planned that SDLT thresholds will change from 1^st April 2025.  This will affect all transactions which complete on or after that date.  The changes are less favourable so if you are thinking about buying, you should bear this in mind.  However, you should also note that Government are able to implement further changes to SDLT at any time.

At WSP Solicitors, our experienced team is ready to assist you with all aspects of SDLT, ensuring you understand your obligations and potential liabilities. With offices in Stroud and Gloucester you can contact us today by using the form on the side of this website for email contact@wspsolicitors.com.