What Is Stamp Duty Land Tax?
All buyers must pay Stamp Duty Land Tax (SDLT) when purchasing a property or land exceeding a specific price threshold in England or Northern Ireland. SDLT is applicable on freehold properties, new or existing leaseholds, purchases made through shared ownership schemes and property transfers carried out in exchange for a sum of money. The amount payable typically depends on when you bought the property and how much it cost you.
At CapEx Tax, we understand that paying tax and working out if you are eligible to make a claim is difficult, which is why we’re here to guarantee a smooth and efficient process when working with our specialists.
We are here to provide specialist guidance and keep you informed of the latest updates and changes to SDLT rates and SDLT exemptions.
SDLT Residential Rates
As of September 23rd 2022 and until March 31st 2025, the Government has implemented new rates for Stamp Duty on residential properties as follows: Property/ Lease Premium/ Transfer Value.
- Up to £250,000 – £0
- The next £675,000 (from £250,001 to £925,000) – 5%
- The next £575,000 (from £925,001 to £1.5 million) -10%
- The remaining amount (anything above £1.5M) -12%
Example: In October 2022 you purchase a house for £295,000, the SDLT you will owe will calculate as 0% on the first £250,000 – 5% on the final £45,000 – this will equate to the total amount saved on SDLT is £2,250.
These SDLT changes will be in effect until 31st March 2025. If you have not previously purchased a property, then you will qualify for first-time buyer’s relief.
Why Did The Stamp Duty Rates Change?
SDLT changes have increased the amount a buyer will need to pay for a property before they become liable to pay Stamp Duty Land Tax, whilst still maintaining the 3% on additional dwellings. The nil-rate residential threshold has been increased from £125,000 to £250,000, whereas for first-time buyers, the threshold for this relief has also been increased from £300,000 to $425,000.
The maximum property value that is eligible for first-time buyers is increased to £625,000.
The reasons for these changes are ultimately to support the housing market, as well as the thousands of jobs that are relying on the housing sector. These jobs can range from construction jobs relying on the construction of newly built properties to estate agents relying on individuals purchasing the properties.
These measures will lower the upfront costs of moving properties and aid those looking to get onto the property ladder.
SDLT On New Leaseholds And Property Transfers
When you purchase a new residential leasehold property, you will pay Stamp Duty on the purchase price of the lease using the rates stated above.
If the total rent value of the lease succeeds the SDLT threshold, then you will be required to pay SDLT at 1% over the portion of £250,000.
Calculating Residential Stamp Duty Refund & Non-Residential Leases
In terms of Residential Development Stamp Duty, there are various types of properties you can purchase.
Different rules apply when calculating residential Stamp Duty Refunds and non-residential leases.
Residential properties are:
- Buildings used as a private residence
- Buildings modified to use as a private home
- Land that is the grounds of a private home (includes rights and interests on the land)
For new residential leases, once you have calculated the amount due on the premium and the rent, combine these two and that will be the total amount due.
For calculating the SDLT on the premium: work out the Stamp Duty on the premium as you would with the sale price on a freehold property. Ignore the level of rent due under the lease.
Stamp Duty Land Tax on Additional Properties
There are higher rates of Stamp Duty Land Tax for those who own more than one residential property. This means you’ll have to pay an extra 3% on top of the standard SDLT rates if buying a new home indicates you’ll own more than one.
However, if you sell your previous main residence to replace it with a new residential property, then you won’t need to pay the 3% SDLT surcharge. Sometimes, buyers will take longer to sell their previous residence, in which case they still need to pay the higher rates.
Nonetheless, if they sell the property within 36 months, they become eligible for an SDLT refund. In exceptional circumstances, buyers may still reclaim the Stamp Duty Land Tax surcharge even if they take longer than 36 months to sell their old property. The latest exception that allows you to reclaim the SDLT surcharge revolves around the impact of COVID-19, which may have prevented the sale.
Stamp Duty Exemptions
In other cases, buyers may become eligible for SDLT exemptions. This is applicable to those buying freehold properties costing less than £40,000, inherited properties, new or existing leases of less than 7 years and more.
Our specialists can guide you through all the possible exemptions you may qualify for, as well as explain the types of Residential Development Stamp Duty refunds.
If you think you may be owed an SDLT repayment, or are curious about specific aspects of residential development Stamp Duty, CapEx Tax Specialists can help to support your Residential Development Stamp Duty Refund.
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As a team we hold very high work ethic standards, this reflects clearly on our testimonials page, we’re tax specialists who truly care and nurture our clients.
Contact our expert tax advisors and get your refund as soon as possible!