Stamp duty – Everything you need to know

If you’re buying a property in England or Northern Ireland that costs more than £125,000 then you’ll have to pay Stamp Duty Land Tax (SDLT). Get the SDLT guidance you need, including how it works, what exactly you need to pay it on, the rates and what it means for first-time buyers.

Do you have to pay stamp duty on land?

Stamp Duty Land Tax (SDLT), commonly referred to as Stamp Duty, is a tax payable on certain property and land transactions over £125,000 for residential properties in England and Northern Ireland. If you purchase a property above the threshold in Scotland, you will pay Land and Buildings Transaction Tax (LBTT) and in Wales, you pay Land Transaction Tax (LTT) instead of SDLT.

What are SDLT rates?

There are several rate bands for Stamp Duty. Tax is calculated based on the amount you’ve paid for the property. As an example, if you purchase a house for £275,000, the SDLT you owe is calculated in this way:

  • 0% on the first £125,000 – £0
  • 2% on the next £125,000 – £2,500
  • 5% on the final £25,000 – £1,250
  • In total, the SDLT is: £3,750

If the purchase price of the property is below £125,000, no stamp duty is payable. The 2% stamp duty rate applies on the purchase price between £125,001 to £250,00. This rises to 5% on the price between £250,001 to £925,000. 10% is then payable for property priced from £925,001 and £1,500,000, and a 12% stamp duty rate on property purchases priced at £1,500,001 and above. Note that the amount of stamp duty that needs to be paid only applies to the part of the property price falling into each band.

Do you pay SDLT on a commercial property?

Yes. The current SDLT threshold for non-residential land and properties is £150,000. The same rates above apply on how much SDLT you have to pay.

Stamp duty for second homes

If you are purchasing additional residential properties, including second homes and buy-to-let properties, you will have to pay an extra 3% Stamp Duty on top of the current rates tabled above for each band. IThe increased rate is added to properties bought for £40,000 or more and doesn’t apply to caravans, mobile homes or houseboats. IIf you’re buying a new main residence, but the sale of your previous main residence is delayed, you will have to pay the higher Stamp Duty tax rate because you’ll own two properties.

When do I have to pay stamp duty?

You must file your Stamp Duty Land Tax return within 14 days after the purchase and pay the SDLT due on the property. This was reduced from the previous 30 day deadline since 1st March 2019. Submitting your return after the 14 days, or not submitting it all, leaves you open to penalties and interest from HMRC.

Stamp duty relief for first-time buyers

A first-time buyer in England or Northern Ireland does not have to pay Stamp Duty on properties worth up to £300,000. This represents a saving of up to £5,000. A first-time buyer is classified as a person purchasing their only or main residence and have never owned a freehold or have a leasehold interest in a residential place in the UK or abroad. If you purchase a property costing up to £500,000, you won’t pay Stamp Duty on the first £300,000. You will pay Stamp Duty on the remaining amount, up to £200,000. If you’re purchasing a property over £500,000, you must pay the standard SDLT and you don’t qualify for the first-time buyer’s relief.

Shared Ownership

Since October 2018, first-time buyers under Shared Ownership schemes are entitled to claim First-Time Buyers Stamp Duty relief on homes worth up to £500,000. The change applies to homes bought on or after 22nd November 2017. If you paid your Stamp Duty in stages during this time, and were previously ineligible for relief, this tax can be claimed back by completing an SDLT return. You must meet eligibility requirements. If you paid SDLT on the market value of the property, you can still claim tax relief.

Shared Ownership – Couples

If you’re married and you’re both first-time buyers, you can get first-time buyers Stamp Duty relief. Unmarried couples can also claim relief if the only person named on the mortgage is a first-time buyer. However, there are other elements that affect couples:

  • The maximum saving on buying your home is still £5,000 no matter how many names are on the mortgage.
  • If a couple splits up, and the property is in both names, both parties have a claim. If only one name is on the property, the other isn’t legally entitled to the relief.

When is stamp duty not payable?

You will avoid paying SDLT if you purchase a property for less than £125,000. There are other circumstances for Stamp Duty exemption, where it’s not payable or can be reduced:

  • Slightly above rate band – if the price is only just within a higher band, you can negotiate with the seller or estate agent to accept a slightly lower price.
  • Transfer of property during separation or divorce – if you’re divorcing or separating from a spouse or partner, you don’t have to pay Stamp Duty when transferring a proportion of the home’s value to them.
  • Transfer of deeds – if deeds are transferred to someone else as a gift or as part of a will – the recipient won’t have to pay Stamp Duty on the market value of the property.

If you do exchange properties with another person, you will each have to pay Stamp Duty on the property you receive based on the market value.

How to pay stamp duty

Stamp Duty returns are usually handled by your solicitor and payment due for you, although you can do it by yourself. Either way, the person on the deed is responsible for submitting the tax return on time. Even if you’ve purchased a property under £125,000, you must still submit a tax return (unless exempt) even if you don’t have to pay Stamp Duty tax.

Am I eligible for a stamp duty refund?

With a lack of understanding of all the legislation regarding SDLT, you could be entitled to a refund. Without a trained solicitor you may have been unaware of the relief you’re entitled to. There are certain cases where this is possible:

  • If you paid SDLT not knowing there is a relief for first-time buyers.
  • Multiple dwellings relief (MDR) makes it possible to reclaim any overpaid SDLT.
  • There’s a 3% surcharge on additional dwellings, but this could potentially not apply to you.
  • Not all corporate property purchases over £500,000 require SDLT payment.
  • Landowners and developers have likely overpaid on SDLT as not all charges are obvious when completing the deal.

If you’ve paid Stamp Duty excess because you owned two homes concurrently, you are entitled to a refund if you’ve sold or given away your previous main residence within 3 years of buying the new one. You can apply for a refund of the higher SDLT rate part of your Stamp Duty bill. You can request a refund for the amount above standard Stamp Duty rates if:

  • You sell your previous home within three years, and
  • You can claim a refund in the first three months of the sale of your previous main home, or within 12 months of the filling in date of your SDLT return – whichever comes later.

Who can help you with your SDLT refund?

The expert team at CapEx will look into your property purchase to see if you’ve overpaid on SDLT and if you can claim that money back. If you are due a refund, we will go through the process of reclaiming Stamp Duty from HMRC. All advice given to you is from a Chartered Tax Advisor, giving you peace of mind of the inspection.

If you think you’re entitled to a Stamp Duty Land Tax return, contact CapEx Tax today. 

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