Stamp Duty Land Tax (SDLT) is a tax imposed by the UK government on purchasing properties and land in England and Northern Ireland. You will only have to pay Stamp Duty Land Tax if your purchase is over a certain price. SDLT was introduced by the Finance Act 2003; it replaced stamp duty with effect from 1 December 2003. Stamp Duty Land Tax is not a Stamp Duty but a form of self-assessed transfer tax charged on land transactions. Stamp Duty is paid on shares bought on a stock transfer form. You will pay SDRT (Stamp Duty Reserve Tax), If you buy shares electronically. When you buy shares, you usually pay a duty of 0.5% if the consideration paid is over £1,000.
Stamp Duty rates were announced in the mini-budget on 23 September 2022 and will remain the same until 31 March 2025. The amount you pay is based on Stamp Duty bands. The tax is calculated on the part of the property price falling in each band.
You pay the tax when you:
•Buy a freehold property
•Buy a new or existing leasehold
•Buy a property through a shared ownership scheme
•Are transferred land or property in exchange for payment; for example, you take on a mortgage or buy a share in a house.
The current SDLT thresholds are:
•£250,000 for residential properties
•£425,000 for first-time buyers buying a residential property worth £625,000 or less
•£150,000 for non-residential land and properties
There are several rate bands for Stamp Duty. The tax is calculated on the part of the property purchase price falling within each band. For example, if you purchase a house for £295,000, the Stamp Duty Land Tax you owe is calculated as follows:
•0% on the first £250,000 = £0
•5% on the final £45,000 = £2,250
Total SDLT = £2,250
The current SDLT are as follows:
You will usually have to pay 3% on top of SDLT rates if you own another residential property.
You can claim a discount (relief) if the property you buy is your first home. This means you will pay:
•No SDLT up to £425,000
•5% SDLT on the portion from £425,001 to £625,000
You are eligible if you and anyone else you’re buying with are first-time buyers.
You cannot claim the relief if the price is over £625,000.
When do you have to pay Stamp Duty Land Tax?
You will have 14 days to file an SDLT return and pay any SLDT due. If you have a solicitor, agent or conveyance, they will usually pay the tax on your behalf on the day of completion. If they do not do this for you, you can file a return and pay the tax yourself.
Exemptions from paying Stamp Duty Land Tax
There may be circumstances where you do not have to pay SDLT or file a return if:
•No money or other payment changes hands for a land or property transfer
•Property left under the terms of a will. There is no requirement to inform HMRC
•Property is transferred because of divorce or dissolution of a civil partnership
•You buy a freehold property for less than £40,000
•You buy a new assigned lease of 7 years or more
•You use alternative property financial agreements
•If you gift your home to someone else, they will not have to pay SDLT if no consideration is received
Written by: Kushal Chhetri