If you are thinking about buying a home, you may have to pay Stamp Duty Land Tax (SDLT). There are different stamp duty rates and rules depending on whether you are a first-time buyer or are buying a second home. The purchase price of the property is also relevant to how much SDLT is needed to be paid.
SDLT is a tax that is charged when you buy a residential property. You may have to pay SDLT if you buy a residential property or parcel of land in England or Northern Ireland above a certain price. From 1st October 2021, there is no SDLT payable for main home purchases under £125,000, unless you qualify for “first-time buyer’s relief.”
A first-time buyer is classed as someone who is buying their only or main home and has never previously owned or had an interest in either a freehold or leasehold residential property, whether in the UK or overseas.
If you are a first-time buyer, then you will pay not SDLT on property up to the value of £300,000. For property up to £500,000, no SDLT will be paid on the first £300,000. Following which you will pay SDLT at the rate of 5% on the remaining sum. In the given example, this would amount to £200,000.
For property over £500,000, the standard rates of SDLT will apply and you will not qualify for first-time buyer’s relief.
Besides the above requirements, other conditions for first-time buyer’s relief are:
If you do not qualify for any SDLT relief, then the rates below will apply to your purchase:
|Minimum Purchase Price||Maximum Purchase Price||Stamp Duty Rate|
|Over £1.5 million||12%|
If you are purchasing a home besides the home you live in, you will have to pay an extra 3% in SDLT on top of the standard rates shown in the table above. This rate applies to property purchased at £40,000 or over. Although it does not apply to mobile homes, houseboats or caravans.
If you are replacing your main residence, you will not have to pay the additional 3% providing your property has already been sold. If your main residence has not sold on the day you complete the new purchase, the higher rate will apply. This is because you are classed as owning two properties. Although you can apply for a refund if you sell your former main home within 36 months.
If it takes over 36 months to sell your former main home, you might still be able to claim a refund if all the following criteria apply:
Additional homes rates are:
|Minimum Purchase Price||Maximum Purchase Price||Stamp Duty Rate (this applies to the part of the property within each band)|
|Over £1.5 million||15%|
The basic definition of a main residence is where a person spends the largest amount of their time each year. Obviously, if you only live in one property, this will count as your main residence. However, for those who occupy more than one property, the situation becomes more complicated.
In order to determine someone’s main residence, official government guidance for the purposes of SDLT sets out several questions:
For the purpose of SDLT, those who are married or in a civil partnership are treated as one person. This means anything owned by one party is considered as being owned by both parties. Therefore, a purchase or sale in one name is still relevant and may influence whether SDLT is due when buying a new property. This could have the effect that married couples may occasionally have to pay the 3% charge when unmarried couples do not.
If you are a non-UK resident purchasing a residential property, you may have to pay an extra 2% on top of the existing Stamp duty rates for property over £40,000. This rule came into effect on 1st April 2021.
You will have 14 days to file an SDLT return and pay any sums due. If you do not submit a return and pay the tax due within the 14-day period, you may incur penalties and interest from HMRC.
Your conveyancing solicitor deals with the SDLT return and makes any payment due on your behalf. Although it is possible to do it yourself. In any case, you are responsible for ensuring it is submitted on time. An SDLT return must still be submitted even in cases where no Stamp Duty is payable, unless the purchase is exempt.
There are situations where SDLT might not be payable, including:
If you are buying a new residential leasehold property, you will pay SDLT on the purchase price of the lease. This is called the “lease premium.” If the total amount of the rent over the life of the lease (called the “net present value”) is over the SDLT threshold of £125,000, you will pay SDLT at 1% on the part over £125,000. This does not apply to existing leases.
The rules for filing an SDLT return for an assigned or existing lease are the same as the rules for purchasing a freehold property if the sale price is £40,000 or over. A return must still be submitted, even if no SDLT is due.
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