CONVEYANCING

Stamp Duty FAQs

Stamp Duty Land Tax (aka Stamp Duty or SDLT) is a tax paid on the value of land or buildings over set thresholds. Those thresholds change from time to time. It applies to England and Northern Ireland. Although Wales is the same legal jurisdiction, it replaced SDLT in April 2018 with its own Land Transaction Tax.

SDLT is paid by anyone buying residential land or buildings in England or Northern Ireland over the value of £125,000. NB reliefs and surcharges do apply.

No! SDLT is paid by the buyer only – NOT a seller!

As at October 2021, the current Stamp Duty Land Tax rates are:-

Property Value SDLT rate
Up to £125,000 Zero
£125,001 – £250,000 2%
£250,001 – £925,000 5%
£925,001 – £1.5mil 10%
£1.5mil + 12%

Your conveyancing solicitor will help you calculate the SDLT. NB it is YOUR responsibility to ensure the correct amount is paid as it is a tax personal to you as the buyer of land or buildings.

As the buyer of the land or buildings it is ultimately YOUR responsibility to ensure that the SDLT is paid.

You have 14 days after completion to file an SDLT return and to pay the amount due.  If you fail to do so, HMRC can impose penalties/interest.

HMRC may impose penalties/interest if you fail to submit an SDLT return and pay the amount due.

Yes! First time buyers currently have (as at August 2022) SDLT concessions.

The first time buyer rate is currently as follows. NO tax is payable up to a value of £300,000. And, a rate of 5% is then charged for any value between £300,001 and £500,000.

To be a first time buyer you must be buying your first and only home in the UK, and have NEVER owned residential in the UK or abroad before.

To qualify for First Time Buyer relief – both/all joint owners must meet the criteria. If they don’t, then the relief will NOT apply (despite one owner qualifying).

Second home owners will pay an additional 3% over standard bandings/rates. This applies to properties with a value of £40,000 or more. It does not apply to caravans, mobile homes, or houseboats.

If there is a period where you have an overlap (without an intention to permanently own more than one home then you can claim concessions. It must apply to your main residence. You must pay the higher rate of SDLT in the first instance, and then make a reclaim when you sell the former main residence. That sale (of your former main residence) must take place within 3 years of buying your new home, AND you submit a claim for repayment of the excess charge within 12 months of having sold that former home.

Currently (Aug 2022) non residents may pay an additional 2% SDLT on the bandings that apply to UK residents. This applies to properties over £40,000 in value.

Stamp Duty is NOT payable when:-

  • Divorce or Separation – where there is a Court order
  • Legacy – property left under the terms of a will
  • Gift – property gifted so long as it is free of mortgage. If you take over a mortgage as part of the gift you may be liable to SDLT on the amount the mortgage (which by definition is not then a ‘gift’)

Your solicitor will get you to ‘sign off’ the agreed amount of SDLT due, and then submit on your behalf both the SDLT ‘return’ (the form declaring how much is due), and the payment itself electronically.

The main two reliefs that apply to the payment of Stamp Duty Land Tax are:-

  • First Time Buyer; and
  • Multiple Dwelling

First time buyer relief gives a reduction against the standard rates as set out above. For those that qualify for this relief (see below), the first £300,000 is free of tax. For properties being bought at a value between £300,001 and £500,000 a rate of 5% applies. Anything above that is at normal rates.

To qualify for first time buyer relief you must be:-

  • UK resident;
  • Buying a residential property for the first time; and
  • Have never owned a residential property before (UK or abroad)

First Timer Buyer relief will only apply where BOTH/ALL joint owners meet the first time buyer criteria. If any one of the joint owners fails to meet the criteria, then the whole transaction fails to gain this relief.

To qualify for First Time Buyer relief you must have NEVER owned a residential property before. Unfortunately, how you came to own a property is irrelevant. So, whilst being given a property under the terms of a will is fully exempt from SDLT at that point, it will nevertheless count as ‘property owned’ when you then come to buy your own place later down the line. Put another way, the SDLT regime would NOT see you as a ‘first time buyer’.

Multiple Dwelling Relief (MDR) is where a purchaser of land buys more than one ‘dwelling’ in one ‘linked’ transaction.

A dwelling is a building that is already used as, or is suitable to be used as or adapted to a single dwelling of its own. This is a matter of fact and the basic principle is that it is a dwelling independent of the ‘main property’ (eg with its own services, and perhaps even its own postal address).

A linked transaction is one where multiple dwellings form part of the same transaction between the same seller, and same buyer.

MDR SDLT is calculated by taking the estimated price of each dwelling, applying normal rates to each one, thereby obtain an average liability, which is then multiplied by the total number of dwellings. This is subject to a minimum of 1% duty if greater than the calculated amount using that formula.

If you are buying a property with one or more buildings that may be deemed to be ‘dwellings’ you MUST advise your solicitor who can then explore this further with you.

As a broad brush, higher rates will be payable where ALL of the following apply:-

  • It is not your only (worldwide) residence
  • Has value of £40,000 or more
  • You have not disposed of your previous main home; AND
  • No one else has a lease on it of more than 21 years

As at October 2021, the current Higher Rate Stamp Duty Land Tax rates are 3% higher than standard rates as follows:-

Property Value SDLT rate
Up to £125,000 3%
£125,001 – £250,000 5%
£250,001 – £925,000 8%
£925,001 – £1.5mil 13%
£1.5mil + 15%

In the unlikely event that you can find a second home for less than £40,000 then the higher rate bandings would NOT apply.

Transfers that are part of a separation or divorce and arise out of a Court Order will be exempt from SDLT in any event (higher rates or otherwise).

If you have bought a property which will not permanently be a second home (ie you intend to sell your previous home in due course), then you will still have to pay higher rate tax for now (and claim it back subject to certain criteria – see below).

You can claim back Higher Rate SDLT paid at a point where you simultaneously owned more than one ‘home’ within 3 years of buying the second home, and within 12 months of selling your former home. Failure to submit a reclaim within these periods is likely to leave unable to claim any refund from HMRC.

Non UK residents pay a higher rate in any event of 2% higher than standard rates.  They are therefore:-

Property Value SDLT rate
Up to £125,000 2%
£125,001 – £250,000 4%
£250,001 – £925,000 7%
£925,001 – £1.5mil 9%
£1.5mil + 10%

A freehold purchase where one or more purchaser is non UK resident will nevertheless result in this surcharge applying to the whole value of the property.

Unfortunately not! So, a married couple with, say an investment property, would be deemed to have a property and therefore would attract higher rate thereafter. HMRC do NOT see a married couple as being two tax payers for the purposes of SDLT.

This should be exempt from SDLT (second home) so long as the property is purchased in your child’s name. Any type of joint ownership involving a second home owner attracts the higher rate for the whole value of the property – not just the portion owned by the second home owner.

If this or any other article on our site has not covered the questions you have about Stamp Duty Land Tax (SDLT) – do reach out! Our team of expert conveyancing solicitors are here to help!

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What is a Stamp Duty?

Stamp Duty Land Tax (SDLT) is the tax that we pay on purchasing residential land and/or property in England & Northern Ireland. The rates of SDLT vary depending upon property value. And, both concessions and higher rates may apply to those bands of tax depending on the person or persons making that purchase. Here we explain the basic rates, and explore the various concessions and higher rates, together with how and to whom they will apply.

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