What is Stamp Duty?
Stamp Duty Land Tax (SDLT) commonly known as Stamp Duty is a tax that you pay as a lump sum when you buy a house in England and was introduced in December 2003, replacing actual Stamp Duty. The equivalent in Wales is Land Transaction Tax and it’s Land & Building Transaction Tax in Scotland.
The following relates to Stamp Duty Land Tax in England:
When you buy a new home, you submit a Stamp Duty Land Tax return to HMRC and pay what you owe within 30 days of completion. Usually your solicitor will deal with the Stamp Duty return & payment for you but it’s best to check with them whether they’re dealing with it or not.
Normally, if the purchase price of your new home is below £125,000, or currently if you’re a first-time buyer purchasing a property up to £300,000, you will need to submit a return even though you won’t have to pay any Stamp Duty
During the Coronavirus restrictions, there was a Stamp Duty holiday, however as restrictions have begun to ease, this is now beginning to phase out.
The most up to date Stamp Duty thresholds are outlined below.
Property Purchases between 1st July 2021 to 30th September 2021
The SDLT thresholds will be:
- £250,000 for residential properties
- £150, 000 for non-residential land and properties
- £300, 000 for first time buyers
Property Purchases from 1st October 2021
The SDLT thresholds will now be:
- £125,000 for residential properties
- £150,000 for non-residential land and properties
- £300,000 for first time buyers
How much SDLT do I have to pay?
The amount of SDLT and the amount you pay varies firstly according to whether the land is residential or non-residential. But you’ll only pay that sliding scale for the proportion of the property price that’s inside that band.
Let’s look at a couple of examples using the SDLT thresholds that are currently in place (July 2021).
The new home is valued at £245,000 and is a residential purchase
You’ve owned property before & are purchasing as an individual
The property will be your only property on completion (you don’t have any other properties at this time, including holiday lets & second homes)
In this scenario, you would pay no SDLT as you are under the current threshold for residential properties.
The new home is valued at £300,000 (£50,000 over the current SDLT threshold)
You have owned property before & this will be your only property on completion
You’re purchasing the property as an individual.
In this scenario, it is likely that you’ll pay £2,500 in SDLT.
Let’s break that £2,500 down;
You’re only being taxed on the £50,000 as that’s what’s above the threshold
You’re being taxed at 5% and are therefore charged £2,500 SDLT.
These are two simple scenarios, which give you an idea of the current SDLT requirements however each individual purchase will be different. Your adviser will be able to explain what SDLT charges you will be exposed to during the course of your mortgage process, thus enabling you to fully understand the charges that you may be faced with.
If you’re buying a second, or subsequent property, either as second residence or to let out, there is an additional 3% Stamp Duty levy over and above the prevailing ‘base’ rate. This 3% levy is based upon the full purchase price, so a second property at £300,000 would attract an additional £9,000 Stamp Duty. Resulting in a total of £11,500 in Stamp Duty to factor into your budget.
Need help calculating the Stamp Duty that you're likely going to need to pay? Here's a link to the Stamp Duty Land Tax Calculator or you can ask your adviser in your next call.
To request a call back, click here.