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?
The cost of SDLT 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.
SDLT is usually payable on all residential properties over £125,000, and non-residential land and properties over £150,000 (unless you’re a first time buyer in which case this becomes £300,000). However, on Wednesday 8th July, the UK government announced an increase on the stamp duty threshold on a temporary basis from £125,000 up to £500,000, which is planned to run until 31st March 2021 in England and Northern Ireland. This is being introduced in a bid to help the UK economy recover from the coronavirus pandemic.
Are Stamp Duty Land Tax 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.
The temporary reductions in SDLT only apply to England and Northern Ireland.
How much is Stamp Duty Land Tax?
Stamp duty 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, or get a quote on our website which will calculate your stamp duty alongside your legal fees.
Land Taxation Tax rates in Wales:
Examples of how to calculate Stamp Duty Land Tax
Let’s say you’re an existing homeowner looking to buy a house in England that costs £450,000. You start paying SDLT at £500,000, therefore your total charge will be £0. Prior to the Stamp Duty holiday, this figure would have been £12,500.
If the same property’s going to be your second home, you’d owe £13,500 where previously this would have been £26,000.
Do I qualify for Stamp Duty Land Tax 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. With the government’s latest announcement, the threshold for first time buyers also rises to £500,000.
Are there any other Stamp Duty Land Tax 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 Stamp Duty Land Tax 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 Stamp Duty Land Tax?
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 my 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.