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Stamp Duty Land Tax (SDLT)

What is stamp duty?

Stamp Duty Land Tax (SDLT) is a progressive tax paid when purchasing a freehold, leasehold or shared ownership residential property over £125,000 in England, Northern Ireland and Wales. New SDLT rates were introduced in 2014's Autumn Statement, introducing a sliding system based on thresholds and dependent on a property price.

How was stamp duty calculated previously?

Before December 2014 a block structure was in place with buyers paying a rate based on the total property purchase price. Its structure meant there are sudden increases in stamp duty when the price goes above the next threshold. E.g. a house £250,000 would have cost £2,500, or 1%, in stamp duty. But if the price was £1 more, it would be an extra £5,000, as they pay 3% on the whole purchase price.

How is SDLT calculated for principal residences from December 2014?

From 3rd December 2014, the new rates of stamp duty will only apply to the amount of the purchase price that falls within the particular duty band, making it more like income tax. The stamp duty brackets are as follows:

Purchase price brackets SDLT rate
£0 - £125,000 0%
£125,001 - £250,000 2%
£250,001 - £925,000 5%
£925,001 - £1.5m 10%
£1.5m + 12%

For example, someone buying a house for £200,000 will pay no stamp duty on the first £125,000, and then 2% of the next £75,000, giving  a bill of £1500. (eg:  £200,000 - £125,000 = £75,000 x 0.02 = £1,500)

When buying a property for £800,000 you would you pay no stamp duty on the first £125,000, then 2% on £125,000 to £250,000 and 5% above £250,000. (eg:  £800,000 - £250,000 = £600,000 x 0.05 = £30,000 + £2,500 = £32,500)

What are the stamp duty reliefs for first time buyers?

From 22 November 2017, first time buyers paying £300,000 or less for a residential property will pay no Stamp Duty Land Tax (SDLT).

First time buyers paying between £300,000 and £500,000 will pay SDLT at 5% on the amount of the purchase price in excess of £300,000, a reduction of £5,000 compared to the amount of SDLT they would have previously paid.

A first time buyer is defined as an individual or individuals who have never owned an interest in a residential property in the United Kingdom or anywhere else in the world and who intends to occupy the property as their main residence.

First time buyers purchasing property for more than £500,000 will not be entitled to any relief and will pay SDLT at the normal rates.

The relief must be claimed in an SDLT return.

How much stamp duty is due on a second property?

The 2015 Autumn statement announced that from April 2016, property buyers in England and Wales will pay an additional 3% on each stamp duty band for second homes or buy to let purchases

Purchase price brackets for second homes/BTL SDLT rate
£0 - £125,000 3%
£125,001 - £250,000 5%
£250,001 - £925,000 8%
£925,001 - £1.5m 13%
£1.5m + 15%

Are there any exceptions when purchasing a second home?

Please note, this does not apply to properties less than £40k, mobile homes, caravans, houseboats or non-residential (commercial, forests, agriculture land) properties. Those looking to purchase properties via a limited company will also be a target for the stamp duty surcharges. In the event there is an overlap period or a gap in ownership of your main residence, purchasers will have 36 months to claim a refund from the higher rates. If you already own properties but intend to buy a permanent home to replace another, you are exempt from the paying the higher rate.

What happens if one of the properties is abroad?

If someone owns property abroad, and wishes to purchase an additional property in England, Wales or Northern Ireland, they will be liable for the higher SDLT rate.

However, if you already own a main residence in the UK in addition to a home abroad, it will still be possible to move house without being liable for the 3% SDLT surcharge. This is on condition that the original UK main residence is sold within 3 years of purchasing the new home in the UK. You then have a period of 3 months to claim back the additional SDLT paid.

To calculate the exact amount you will pay, the government has created a stamp duty calculator

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