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5 Commonly Asked Questions On Stamp Duty Land Tax
2 May 2023
1. WHAT IS STAMP DUTY LAND TAX (SDLT)?
Stamp Duty Land Tax (SDLT) is a tax that is applied to the purchase of land and properties with values over a certain threshold in England and Northern Ireland. If the land or property is in Scotland or Wales, the rules are very similar but are administered under the names Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT).
SDLT is complex and regularly changing, having been subject to multiple alterations since it was first introduced in 2003. In fact, more so than any other comparable tax.
2. WHAT ARE THE SDLT THRESHOLDS?
At time of writing, the current SDLT 0% thresholds are:
- £250,000 for residential properties
- £425,000 for first-time buyers purchasing a residential property worth £625,000 or less
- £150,000 for non-residential land and properties
If you’ve bought a property that’s under the £250,000 threshold, good news, there’s no SDLT to pay!
If you’re buying an additional property, for example a holiday home or buying a new main residence without selling your old one, you’ll have to pay an extra 3% in Stamp Duty on top of the current standard residential rates. The additional 3% rate will also usually apply to purchases of residential property by companies.
Unfortunately, many people end up paying too much SDLT, but steps can be taken to rectify incorrect returns and make retrospective claims for relief and obtain a refund. You’ll have 12 months from purchase to do this, and in some cases, up to 4 years.
3. WHAT SDLT RELIEF AM I ENTITLED TO?
If you’re buying your first home, freehold or leasehold, with a mortgage or buying outright, you might be eligible for SDLT reliefs which reduce the tax you need to pay.
There are many other circumstances where you might be entitled to SDLT reliefs, for example:
- you’re a property developer buying derelict property to develop
- the property you’re purchasing is made up of multiple dwellings (known as Multiple Dwellings Relief)
- you’re buying a property made up of a mixture of residential and commercial elements, e.g. a shop with flats above
- you’re a developer buying a property from a deceased person’s estate
- you’ve entered into a sale and leaseback arrangement
- you’ve moved property into or out of a partnership.
These examples are by no means exhaustive, but give a brief insight into just how many potential SDLT reliefs are available.
4. WHEN DO YOU PAY SDLT?
You’ll need to consider and usually pay the tax when you:
- Purchase a freehold property
- Purchase a new or existing leasehold
- Purchase a property through a shared ownership scheme
- Are transferred land or property in exchange for payment, e.g. you take on a mortgage or buy a share in a house
5. HOW DO YOU PAY SDLT?
You’ll need to send an SDLT return to HMRC and pay the tax within 14 days of completion. Your appointed solicitor or conveyancer will usually do this on your behalf and add it to the fees you pay them. Ultimately you need to make sure it’s paid as penalties can be applied for late filing and payment.
UNSURE ABOUT YOUR SDLT OBLIGATIONS?
If you’re about to make a purchase, or have recently purchased a property, and would like to understand more about your SDLT obligations and liability, our Fortus team can help. We can work with you and your solicitor/conveyancer to ensure the correct amount’s paid. Not all SDLT charges and reliefs are immediately obvious, so we’ll help ensure no unexpected liabilities crop up or relief lost.
An important note: Content correct at time of publishing.