What is Stamp Duty Land Tax (SDLT)?
Stamp duty land tax is the tax paid when you buy piece of land or residential property having value of more than £125,000 buying first home and £40,000 buying second home. This tax is applicable on buyers living in England and Northern Ireland and levied on both freehold and leasehold properties. It is applicable in both the cases where you are buying the property right away or with mortgage.
Stamp duty land tax is not levied if you are buying a property in Scotland & Wales. In Scotland, you need to pay Land & Buildings Transaction Tax (LBTT) whereas in Wales, land transaction tax is applicable.
How much is Stamp Duty Land Tax?
The stamp duty land tax paid by a buyer while purchasing the property depends upon –
- Whether the property is residential or non-residential?
- Whether you are a first time home buyer or a second time home buyer.
You can easily calculate your stamp duty land tax as per the property value falling within each band.
Suppose you bought a house for £300000, stamp duty land tax will be calculated as –
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £50,000 = £2,500
Total stamp duty land tax = £2,500 + £2,500 = £5,000
Stamp Duty Land Tax Rates
| Purchase value | SDLT Rate (Main residence) | SDLT Rate (Additional homes) |
| £0 - £125,000 | 0% | 3% |
| £125,001 - £250,000 | 2% | 5% |
| £250,001 - £925,000 | 5% | 8% |
| £925,001 - £1.5m | 10% | 13% |
| Above £1.5m | 12% | 15% |
Stamp Duty on Second Homes
Buyers who buy additional residential properties like second homes & buy-to-let properties needs to pay extra 3% stamp duty tax on the current rates specified for stamp duty land tax. This increased tax rate of 3% is only applicable on properties having value of more than £40,000. This increased rate is not applicable on caravans, mobile homes or houseboats.
If you are buying a second home and want to purchase it on normal SDLT rate and not on increase rate, you need to sell your first home before buying the second. If you will not, you will be considered as the owner of two properties and you have to pay higher stamp duty rates.
There may be a case of refund if you sell or give away your previous property within 3 years of buying your new house, you can apply for the refund of the additional amount you paid as per high SDLT rate while paying stamp duty land tax. You can only request for a refund if –
- You sell your previous residence within 3 years
- You claim your refund within 3 months of the sale of your previous residence or within 12 months of the filing date of stamp duty land tax return (Which ever comes later)
Stamp Duty Relief for First Time Home Buyers
Buyers who are purchasing their first house in England or Northern Ireland are not required to pay stamp duty land tax up to the value of £300,000. It means that the buyer only needs to pay stamp duty land tax on the remaining amount i.e. £200,000 (if buying property costing up to £500,000). This is the relief provided only to the first time buyers if they are purchasing their only or main residence and never owned any residential property in the past in UK or abroad.
In case, the property you are buying is valued at £500,000, you need to pay the standard rates of stamp duty land tax and you will not be entitled for first time buyer’s relief. For example- You are buying a property worth £400,000. You only need to pay stamp duty land tax on £100,000. This relief is only applicable for first time main residence buyers buying house on or after 22 November 2017.
You are not entitled for this relief in case you choose to pay stamp duty in stages & previously not eligible for the relief, you can easily claim this tax back now. In order to claim back stamp duty land tax refund, you need to file stamp duty land tax return as per the eligibility requirements.
Joint Ownership & Stamp Duty Relief
In relation to joint ownership, there is a difference in the rules related to stamp duty tax relief. If you are a married person and jointly buying a property with your spouse, you both must be eligible first time buyers in order to get entitled for stamp duty relief.
If we talk about unmarried people, they can still get reduction in the stamp duty tax amount, if the name of the individual mentioned on the mortgage deed is a first time buyer. The maximum individual can save on purchase of property is £5,000 regardless of the names mentioned in the mortgage deed.
Pay Stamp Duty Land Tax
Who Pays Stamp Duty?
Stamp duty is paid by the buyer of the land or property in England & Northern Ireland having value of more than £125,000 (in case of main residence) & £40,000 (in case of additional homes).
When is Stamp Duty Land Tax Paid?
Stamp duty tax return must be filed & payment must be done within 14 days from the date you purchased your home or the transaction takes place. Previously, the time period allotted for filing & paying stamp duty land tax was 30 days. It has been reduced to 14 days w.e.f 1st March 2019.
In case you are unable to submit your return and pay your tax after 14 days from the effective date of transaction, HMRC may charge you with penalties as well as interest.
When is Stamp Duty not Payable?
If you are buying a property having value of less than £125,000, you can easily avoid the stamp duty land tax. There are many circumstances or situations in which stamp duty is either not payable or reduced to a certain level. The following circumstances are mentioned below –
- Slightly over rate band – If the price is slightly higher and due to this, the amount lies into a higher band category, you can request the seller or estate agent to accept the slightly lower price.
- Transfer of property in separation or divorce – In some cases, individuals separating from his/her spouse or partner transfer portion of their property value to him are not entitled to pay stamp duty land tax to HMRC.
- Transfer of deeds – Transfer of deeds is another situation where you may not need to pay stamp duty land tax. If you are transferring the deeds of your home to some other person in your will or in the form of gift, you are not entitled to pay stamp duty tax on the market value of the property. In case you are involved in exchange of property with any other person, stamp duty land tax is levied on the property and both the persons need to pay it.
How to Pay Stamp Duty Land Tax?
Stamp duty land tax is also paid in the following cases –
Land & Property Transfers
When a land or property transferred to you in exchange of any payment or consideration, you may be liable to pay stamp duty land tax (SDLT). There are certain reasons for land property transfer which are as follows –
- Transfer as a result of marriage, civil partnership or moving in together
- Transfer on the basis of Divorce, separation or the end of a civil partnership
- Transfer when it is left in a will or given as a gift
- Transfer when land or property is jointly owned.
- Transfer when large share of property is given as a gift.
- Transfer to or from a company
Shared Ownership Property
When you buy land or property in a shared ownership scheme after obtaining the approval from the public body, you may need to pay stamp duty land tax. Approved public bodies include –
- Local housing authorities
- Housing associations
- Development corporation
- Housing action trusts
- The Northern Ireland housing executive
- The commission for the new towns
It totally depends upon you that which method you want to use to pay your stamp duty land tax from the following -
Stamp Duty Land Tax (SDLT) Reliefs & Exemptions
An individual can reduce his or her stamp duty land tax by availing reliefs & exemptions provided by HMRC. When you will avail the provided relief, your stamp duty land tax will reduce which you can claim in your stamp duty land tax return.
Stamp Duty Land Tax Reliefs
You can claim SDLT reliefs provided by HMRC in the following cases –
Stamp Duty Land Tax Exemptions
There are certain exemptions provided by HMRC due to which you don’t’ have to pay SDLT or file a return if –
Any Questions? Request a callback from our Tax Experts.
