If you’re thinking of buying a house, Stamp Duty Land Tax (SDLT) could be one of the major costs that you need to consider. It’s not always payable on all properties and for all buyers, so here we answer some of the most popular questions regarding stamp duty on property.
Who pays Stamp Duty Land Tax?
SDLT is payable on all residential properties over £125,000, and non-residential land and properties over £150,000. The cost is the responsibility of the buyer, not the seller, so you need to factor it into your budget when you’re buying a new home. However, there’s no stamp duty for first time buyers on properties up to £300,000, so you’ll be exempt from paying if this applies to you. You should also note that if you’re buying a second home, there’s an additional 3% ’additional property’ rate on all properties over £40,000.
Are SDLT costs the same throughout the UK?
Stamp Duty Land Tax is only payable in England and Northern Ireland. In Scotland, you have to pay something called Land and Buildings Transaction Tax, while in Wales it’s the Land Transaction Tax.
How much is SDLT?
The tax rates depend on how much the property you’re buying costs, and whether you qualify for relief as a first time buyer. If you want to know how to work out stamp duty, it might be easiest to use a stamp duty calculator. However, the table below should give you a clear idea of the different stamp duty bands and the charges that apply to each one.
SDLT rates in England
LTT rates in Wales:
Examples of how to calculate stamp duty
Let’s say you’re an existing homeowner looking to buy a house in England that costs £300,000. You start paying SDLT at £125,000, with a rate of 2% up to £250,000. That’s £2,500, plus you owe 5% on £250,000 to £300,000, which is another £2,500. This means your total SDLT will be £5,000.
If the same property’s going to be your second home, you’d owe £3750 for the initial SDLT threshold for additional properties up to £125,000. There’s £6,250 to pay for the second band, and £4,000 for the third, giving you a total SDLT bill of £14,000
SDLT on £400,000 as existing homeowner in England:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the next £150,000 = £7,500
Total SDLT cost = £10,000
SDLT on £400,000 for additional property in England:
3% on the first £125,000 = £3,750
5% on the next £125,000 = £6,250
8% on the next £150,000 = £12,000
Total stamp duty cost = £22,000
SDLT on £400,000 as first time buyer in England:
0% on the first £300,000 = £0
5% on the next £100,000 = £5,000
Total stamp duty cost = £5,000
Do I qualify for SDLT exemption for first time buyers?
There have been some SDLT changes in recent years, and since November 2017 first time buyers don’t have to pay any tax on properties up to £300,000 under certain circumstances. On properties up to £500,000, you pay a 5% charge between £300,000 and the purchase price. If the property costs over £500,000, you can’t claim the relief and you have to pay the standard rates which relate to the total purchase price.
You can claim relief as a first time buyer as long as everyone buying the property has never owned a property either in the UK or abroad, or inherited a residential property. You must be intending to live in the home you’re buying, which has to cost less than £500,000. Unfortunately, there isn’t any SDLT relief for first time buyers in Wales.
Are there any other stamp duty exemptions?
As well as first time buyer exemption, you may be able to get stamp duty relief in the case of things like multiple dwellings, compulsory purchases, Right to Buy purchases and if the property’s being used for charitable purposes. If you think you might be entitled to relief, make sure you check the relevant terms and seek specialist tax advice to see if you meet the criteria.
What is Buy to Let SDLT?
With Buy to Let properties, SDLT rates work in exactly the same way as they do for people buying an additional home – 3% is added to each band as illustrated above.
What is SDLT on shared ownership?
If you’re buying a house through a shared ownership scheme, you can either pay SDLT in stages or as a one-off payment known as market value election. With the latter, you’ll pay SDLT based on the full price of your home (rather than just on the premium you are paying for the share you will own), with nothing to pay in the future if the value goes up. If you decide to pay in stages, you’ll have to pay a higher rate of SDLT if your property increases in value.
When do you have to pay SDLT?
Your conveyancer will submit the SDLT return on completion of your purchase and will pay the tax due to HMRC on your behalf. There is usually a fee payable for them doing this work, however it is worth paying to ensure it is done correctly – the fines for missed deadlines or incorrectly submitted returns soon mount up.
Can I add SDLT to mortgage?
If you can’t afford to pay the SDLT on a new property, it may be possible to add it to your mortgage. However, you should think carefully about doing so, as you’ll pay interest on it, which can add up to a large amount over the average 25-year mortgage term.
Disclaimer: The article above is only a rough guide on Stamp Duty.