Stamp duty land tax (SDLT)

Stamp Duty Land Tax (SDLT)  is a tax payable when purchasing property or land over a certain price in England and Northern Ireland. SDLT is a mandatory tax imposed when buying property above a certain price threshold. However, it’s essential to note that different tax systems apply in Scotland and Wales, where you’d pay Land and Buildings Transaction Tax and Land Transaction Tax respectively

When SDLT Applies on the purchase of:

• Freehold property
• New or existing leasehold
• Property through a shared ownership scheme
• Transferred land or property in exchange for payment (e.g., taking on a mortgage or buying a share in a house.

• Residential properties: £250,000
• First-time buyers: £425,000 (for properties worth up to £625,000)
• Non-residential properties: £150,000

Consideration for SDLT

The total value for SDLT (consideration) usually includes Price paid for the property or land and additional payments such as goods, services, release from a debt, or transfer of a debt (including outstanding mortgage value)

SDLT Payment Process

Filing a Return: Submit an SDLT return to HMRC within 14 days of completion.

Payment: Pay the tax within the same 14-day period.

SDLT Applicability on Applies to residential property purchases over £250,000.

Standard SDTL Rates:

• 0% on up to £250,000
• 5% on £250,001 to £925,000
• 10% on £925,001 to £1.5 million
• 12% on over £1.5 million

In case of First-time Buyers:

• No SDLT up to £425,000
• 5% on £425,001 to £625,000
• No relief over £625,000

If you’re purchasing an additional residential property, such as a second home or buy-to-let investment, you’ll typically incur an extra 3% SDLT on top of the standard rates. However, if you’re replacing your main residence with a new property and have already sold your previous main home, you won’t be subject to the additional 3% SDLT.

In the scenario where you haven’t sold your main residence by the completion date of your new purchase, resulting in owning two properties simultaneously, you’ll be liable for the higher rates. However, you can apply for a refund if you sell your previous main home within 36 months. Even if it takes longer than 36 months to sell your previous main home, you may still be eligible for a refund under exceptional circumstances, such as government restrictions due to COVID-19 or a public authority blocking the sale.

Please note that.

• On Additional Properties: 3% surcharge on top of standard rates.
• Leasehold Properties: 1% SDLT on rent exceeding £250,000.

Buy New Home After selling First Home

When replacing your main residence, you’re exempt from the additional 3% SDLT if your previous main residence has already been sold.

SDLT Claim , you’ll need to write to HMRC, providing detailed information including your personal details, the circumstances preventing the sale of your property, details of both properties involved, the amount of higher rate SDLT paid, and the bank account details for the repayment.

Rates for non-UK residents

Non-UK residents buying residential property in England or Northern Ireland typically face a 2% surcharge on top of standard SDLT rates. However, exemptions may apply, and additional SDLT rates might also be applicable, such as for purchasing additional properties or as a first-time buyer.

When land or property ownership changes hands for any payment, Stamp Duty Land Tax (SDLT) may be applicable. The SDLT rules vary depending on the circumstances of the transfer. HM Revenue and Customs (HMRC) provides guidance on transfers in various situations, including:

• Transfers due to marriage, civil partnerships, or cohabitation.
• Transfers following divorce, separation, or the dissolution of a civil partnership.
• Transfer of jointly owned property or land.
• Transfers where the larger share is gifted.
• Gifts or inheritances.
• Transfers involving companies.

Reliefs Eligibility situations, including:

• First-time buyers
• Multiple dwellings
• Building companies buying homes
• Employers buying employee homes.
• Local authority compulsory purchases
• Developers providing community amenities.
• Charities for charitable purposes
• Right to buy properties
• Social housing providers
• Crown employees
• Property investment funds

SDLT on Shared Ownership Properties

When purchasing a property through a shared ownership scheme run by certain approved public bodies, you may be liable to pay Stamp Duty Land Tax (SDLT). These bodies include local housing authorities, housing associations, and others. You have two options for SDLT payment:

1. Market Value Election: Pay SDLT based on the total market value of the property upfront, regardless of the share you’re buying. No further SDLT is required, even if you increase your share later.
2. Paying in Stages: Make an initial SDLT payment on the lease premium, if it exceeds the residential threshold. You may owe additional SDLT if the total rent over the lease’s life surpasses the SDLT threshold.

If you acquire more shares in the property, you don’t need to pay SDLT until you own over 80%. Calculate SDLT for additional shares by:

1. Calculating SDLT due on the total amount paid for the property so far.
2. Dividing the price of the new share by the total amount paid for the property.
3. Multiplying the result by the SDLT due on the total amount paid for the property.

Exemptions: No SDLT or return needed if:

• No payment in transfer
• Inherited property
• Transfer due to divorce/civil partnership dissolution.
• Buying freehold property under £40,000
• Lease under 7 years below thresholds.

Multiple dwellings relief for transactions before 1 June 2024

If you incurred a stamp duty surcharge on a property that includes an annexe, granny flat, or any smaller structure on the premises of your main home, you might qualify for an SDLT rebate. Properties with a self-contained annexe are classified as a single residence rather than two separate entities, provided that the main house constitutes at least two-thirds of the property’s total value. If your property fits this description, you may be eligible for a rebate.

Multiple dwellings relief for transactions After 1 June 2024

Multiple dwellings relief (MDR) is abolished and can no longer be claimed for transactions which complete, or substantially perform, on or after 1 June 2024, affecting any SDLT claim.