What is Stamp Duty and who pays?

What is Stamp Duty and who pays?

Stamp Duty Land Tax (SDLT) is a tax charged by the UK Government when someone purchases land or property over a certain price threshold.  The tax is payable to HMRC by the buyer of a property and the amount is dependent on whether the land or property is used for residential, non- residential or mixes purposes.

The current SDLT threshold is £125,000 for residential properties.  (Anything below that is not subject to SDLT) The higher the price, the higher the SDLT.

Below we explain First Time Buyer Relief from SDLT and the extra SDLT that sometimes may be payable (but reclaimable) if you purchase a second property.

SDLT Calculator

The HM Revenue and Customs (HMRC) have a useful online calculator to help you work out how much SDLT you will have to pay when you buy your new home/property.

First Time Buyer Relief

Currently if you are a first-time buyer then SDLT will not be payable if the purchase price of the property you are buying is £300,000 * or under.  If the purchase price of the property you are buying is between £300,0001 and £500,000 then the SDLT is calculated at 5% of the value of the property over £300,000

* This figure is higher in London

Here is an example:-

Purchase price £300,000.  No SDLT is payable.

Purchase price £325,000.  SDLT is payable at the rate of 5% on £25,000 which means £1,250 SDLT is due on completion of the purchase.

To qualify, for first time buyer relief, you (and your partner if you are buying a property with someone else) must never have  owned a property.  This includes a property anywhere in the world, shared ownership properties with housing associations, properties jointly owned with someone else at some point in your past and even static caravans! Also the property needs to be a property you are buying as your own main residence, not a buy-to-let or second home.

Second Home Property Purchases

If you are buying a second home/property then currently there is an SDLT surcharge to pay.  Property developers and buy-to-let landlords may be affected by this surcharge.  There are also occasions where a home owner may have to buy their new home before they sell their existing home thereby owning 2 properties.  In these circumstances the surcharge would apply.  However in this situation if the former home is sold within three years, currently it is possible to claim back the SDLT surcharge previously paid.

If you would like to find out more, or have any questions, please contact a member of our residential conveyancing team on 01904 624903.

Vicky Middleton