Overview of SDLT advice for landlords:
Everybody knows that a buy of property involves various outgoings. If the price exceeds a certain figure, there is a tax. It is payable to HM Revenue and Customs. Failure to obtain the required tax Certificate makes the transaction not registered at the HM Land Registry. There are of path other forms of landlord tax payable. These tax changes were announced as part of George Osborne’s Autumn Statement in 2015.
SDLT is stamp duty:
The problem is that not everyone recognizes how the system works. These notes are an effort to explain a little more about it.
First, the most frequent error made by journalists and Estate agents is to use the appearance stamp duty which is not accurate at all.
Stamp Duty does subsist. It applies primarily to any transaction concerning the purchase of stocks/shares investment securities. The rate is 0.5% on the procure value. This has remained unaffected for decades.
Stamp Duty used to relate to the purchase of a property as well. However, that has not been true for over a decade and the system is now rather different.
When does SDLT apply?
What does apply is SDLT advice for landlords. This is relatively dissimilar. Its regulations and rates are pretty diverse as well.
When first commenced this was on a fixed scale appropriate to every purchase in just the same way. HM Government has afterwards made it enormously complex even for solicitors so that there are now in effect at least four different tax regimes. They are as follows:
- Tax on the purchase of an only or major home (including a home replacing one’s previous home).
- Tax on next home, investment property (residential) or one’s only or chief home being purchased without the trade of one’s previous only or main home.
- Non-residential or mixed-use property.
- New lease of property.
The Government has very carefully produced this Tax calculator to help landlords calculate their tax bills.
The different types of SDLT:
For convenience, these will be described in different types as follows:
Type 1:
This is payable as follows:
If the price does not exceed £125,000: 0%
If the price does go over £125,000 but does not exceed £250,000: 0% on first £125,000, and 2% on the surplus.
If the price does exceed £250,000, but does not exceed £925,000: 0% on first £125,000, 2% on £250,000, and 5% on excess.
If the price does go over £925,000, but does not go above £ 1.5 million: 0% on first £125,000, 2% on the next £125,000, 5% on next £675,000, and 10% on the excess.
If the price exceeds £1.5 million:
0% on the first £125,000, 2% on next £125,000, 5% on next £675,000, 10% on next £575,000 and 12% on the surplus.
Type 2:
The rates are similar to those in type 1 but amplified by three percentage points in every case (so the rates are 3%/5%/8%/13% respectively).
Type 3:
The rates are quite a diverse scale.
If the price does take VAT, the grossed up value is the purchase for purposes of calculating this tax.
If the price does not exceed £150,000: 0%.
If the price does go above £250,000: 0% on the first £150,000, 2% on the next £100,000, and 5% on the excess.
Type 4:
This engages a complex calculation of Net Present Value. It is a way of assessing the current lump sum value of the rent which the lease reserves.
4 A:
If the Net Present Value not exceeds £125,000 (residential) or £150,000 (non residential or mixed): 0%
4 B:
If the Net Present Value does go above that type 4A figure but does not go over £5 million: 0% up to the type 4A figure and 1% on the excess.
4 C:
If the Net Present Value exceeds £5 million: 0% up to the type 4A figure, 1% on the next part of type 4A figure up to £5 million, and 2% on excess.
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