Stamp Duty Land Tax Series - Bought a property recently? Would You Like a Stamp Duty Refund?
When you purchase a property in the UK there is stamp duty payable to HMRC. Rates are published on their website and, on the face of things, it seems a simple and easy calculation followed by the painful payment process.
What you are probably unaware of is that there are a number of reliefs which can be claimed which will reduce the stamp duty burden. Known officially as stamp duty land tax (SDLT) this is a tax which was introduced by the government in December 2003.Current rates, valid until 31 March, are:
| Property or lease premium or transfer value | SDLT rate |
|---|---|
| Up to £500,000 | Zero |
| The next £425,000 (the portion from £500,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
These rates take account of the current holiday on purchases of property over £500,000, which is due to end at the end of March 2021. Once that happens, from April 2021 rates will revert to:
| Property or lease premium or transfer value | SDLT rate |
|---|---|
| Up to £125,000 | Zero |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
Let’s say you complete a purchase prior to 31 March, with a purchase price of £450,000. The SDLT will be nil. However, from 1 April the amount would revert to £12,500. Similarly on a purchase price of £250,000 the SDLT will be nil whereas from 1 April it will revert to £2,500.
You can easily see how the cost of SDLT increases quite steeply as the purchase price of your property goes up. Going even higher, if your purchase price is £750,000 the current SDLT will be £16,250 and from 1 April a whopping £27,500.
However, some of the reliefs referred to above may enable you to claim a reduction in SDLT. Reliefs afforded include such things as granny flats on the property, commercial buildings on the plot, rights of way or wayleaves across the property, when an exclusivity agreement and non-refundable deposit has been paid and even first time buyer purchases.
When all parties to a transaction are first time buyers there is also a relief to claim which reduces the SDLT on that particular purchase.
All property types are included by any purchaser for SDLT. This includes foreign buyers and for the sale of commercial properties, including sites acquired by developers.
If your property is not your primary residence there is also a surcharge of an additional 3%. So, if you purchase a property as a holiday home or as a buy to let property this additional burden will apply to that purchase.
Once the purchase transaction is complete an SDLT return must be lodged for all property transactions in excess of £40,000, whether any SDLT is payable or not. This return must be lodged within 14 days of completion. If you fail to lodge the return you will be liable to a penalty fine. So it is important that you remain on top of your situation when you buy a property for whatever reason, whether it be a freehold or leasehold purchase.
The types of relief available tend to lean toward larger properties and when a purchase has been made for more than © £500,000 there is more likelihood that a relief may be available. This does not preclude smaller and lower priced properties entirely.
In the next article I shall evaluate some of the finer detail regarding SDLT and offer some case studies. Meanwhile if you have any questions about a transaction you may have made in the last year and sometimes for up to four years ago please do not hesitate to contact me.
If you would like an exploratory chat about this, please contact me. Andrew Wood at Kaywood Ltd./BCA
Email: andrew@kaywood.co.uk. Website: www.kaywood.co.uk
LinkedIn: https://www.linkedin.com/in/andrewwoodbca
Kaywood Ltd
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Andrew Wood Managing Director
- February 01, 2021
- 0779 569 2645
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