What is Stamp Duty Land Tax?
Stamp Duty Land Tax (‘SDLT’) is payable to H M Revenue & Customs where chargeable consideration is given in return for property or land – this is not limited to purely monetary consideration.
SDLT on main residence:
In general, for residential property purchases, SDLT is payable at the following rates on your MAIN home or residence:
- Up to a price of £125,000.00: 0% of the purchase price
- The next £125,000.00 (the portion from £125,001.00 to £250,000.00): 2% of the purchase price
- The next £675,000.00 (the portion from £250,001.00 to £925,000.00): 5% of the purchase price
- The next £575,000.00 (the portion from £925,001.00 to £1.5 million): 10% of the purchase price
- The remaining amount (portion above £1.5 million): 12% of the purchase price
If you buy a house to be your main residence and only property for £275,000.00 the SDLT you owe is calculated as follows:
- 0% on the first £125,000.00 = £0
- 2% on the next £125,000.00 = £2,500.00
- 5% on the final £25,000.00 = £1,250.00
SDLT on subsequent properties:
Higher rates of Stamp Duty will apply to most purchasers of additional properties or second homes in England, Wales and Northern Ireland where, at the end of the day of the transaction, individual purchasers who own two or more residential properties and are not replacing their main residence.
For residential property purchase, SDLT is payable at the following rates on your SECOND home or additional property:
- Up to £40,000.00: exempt
- From £40,001.00 up to £125,000.00: 3% of the purchase price
- The next £125,000.00 (the portion from £125,001.00 to £250,000.00): 5% of the purchase price
- The next £675,000.00 (the portion from £250,001.00 to £925,000.00): 8% of the purchase price
- The next £575,000.00 (the portion from £925,001.00 to £1.5 million): 13% of the purchase price
- The remaining amount (portion above £1.5 million): 15% of the purchase price
An additional residential property is purchased for £200,000.00. SDLT is calculated as follows:
- 3% on the first £125,000.00 = £3,750.00
- 5% on the remaining £75,000.00 (The portion between £125,000.00 and £200,000.00) = £3,750.00
Total SDLT due = £7,500.00
An additional residential property is purchased for £100,000.00. SDLT is calculated as follows:
- 3% on £100,000.00 = £3,000.00
SDLT can account for a large percentage of the costs incurred when purchasing a property and a saving in this regard can therefore have a significant impact. You should be aware of the exemptions and reliefs currently available.
Claiming back a Refund for Stamp Duty paid on a Second Home:
You are eligible to make a refund claim if you sell your main residence within 3 years of the date you complete your second home purchase and this property becomes your main residence. The refund will be the amount which you have paid above what you would have been charged, has the property not been an additional property or second home.
If you purchased a property at a price of £150,000.00 the following rates would apply:
2nd Home Purchase:
- 3% up to £125,000.00 = £3,750.00
- 5% on £25,000.00 = £1,250.00
Total £5,000.00 Stamp Duty to be Paid
If the property was your now your main home or residence the Stamp Duty you are still liable to pay:
- 0% up to £125,000.00 = £0.00
- 2% on £25,000.00 = £500.00
Total Stamp Duty £500.00
The refund you would be entitled to received if £4,500.00
Any claims need to be submitted to HMRC within 3 months of the completion date of the sale or within 1 year of the date in which the Stamp Duty was filed on the purchase – whichever comes later.
The refund claim form can be completed online and must be printed and submitted by post to HMRC. There will be certain information required by HMRC in order for the claim to be submitted. This information can be provided by the Conveyancer who acted in the purchase.
HMRC aim to process the repayment within 15 working days from the date they receive all of the information which is requested. If a claim is unsuccessful HMRC will issue a letter explaining why.
SDLT is a very complicated and extensive area of law and this fact sheet is by no means exhaustive. You should obtain full details and specific legal advice in respect of any possible SDLT implications and exemptions in relation to your particular transactions and individual circumstances.
The contents of this document should not be regarded as constituting legal advice and should not be relied upon as such. You should seek specific legal advice in respect of all legal issues or problems.