Q & A - Stamp Duty Land Tax

News at Thorgills | 02/01/2019


What is stamp duty?

Stamp Duty Land Tax (SDLT) is a tax paid when you buy property or land in England or Northern Ireland. It is calculated using the purchase price of the property, and uses a similar bracketing system to income tax, as discussed below.

When do I pay it?

SDLT is paid when you buy a freehold property, a new or existing leasehold, or a share of a property through a shared ownership scheme. It is also paid if you are transferred land or property in exchange for payment – for example if you take on a mortgage or buy a share in a house.

The tax is payable regardless of whether the property is residential or non-residential.

You must pay the tax to HMRC within 30 days of completion. If you have a solicitor, agent or conveyancer, they’ll often pay the tax on your behalf on the day of completion and then add the amount to their fees – though you should check with them to ensure that they make the payment in time.

Are there any exemptions?

The current threshold for paying SDLT is £125,000 for residential property and £150,000 for non-residential property and land. This means that if you are buying a property for less than this amount, you will not have to pay SDLT.

There are additional reliefs if you are buying your first home. If all of the registered purchasers of the property are first-time buyers, you will not have to pay SDLT if the purchase price of the property is £300,000 or less. If the property is between £300,001 and £500,000, you’ll only need to pay 5% on the portion in this bracket.

How is it calculated?

SDLT is calculated using the purchase price of the property. The brackets are below:

Property value                                                          SDLT rate

Up to £125,000                                                           Zero

The next £125,000 (from £125,001 to £250,000)       2%

The next £675,000 (from 251,000 to £925,000)         5%

The next £575,000 (from £925,001 to £1.5m)            10%

The remaining amount (the portion above £1.5m)     12%

 

For example, if you bought a property for £350,000 you would pay £7,500 in SDLT, as shown below:

Property value                                                           SDLT rate     You pay

Up to £125,000                                                            Zero              £0

The next £125,000 (from £125,001 to £250,000)        2%                £2,500

The next £100,000 (from 251,000 to £350,000)          5%                £5,000

Total                                                                                                  £7,500

 

You can read more about stamp duty here.