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A Guide to Stamp Duties

There are three types of Stamp Duty:

  • Stamp Duty Land Tax (SDLT) - which applies to land transactions in England and Northern Ireland (Land and Buildings Transaction Tax (LBTT) applies in Scotland; Land Transaction Tax (LTT) applies in Wales)
  • Stamp Duty Reserve Tax (SDRT) - which applies to sales of securities on the stock market; and
  • Stamp Duty - which applies to the sale of shares and securities.

In all cases the purchaser must pay the duty based on the price paid or value if not paid in cash.

Stamp duty land tax

Stamp duty land tax is a tax on the acquisition of interests in UK land including houses, flats, other land and on both the grant and assignment of leases.

The purchaser is responsible for the payment of the tax and filing of the land transaction return, although is normally done by their solicitor on their behalf. The return should be filed within 14 days of the transaction.

SDLT is payable whether or not the parties to the transaction are based in England or Northern Ireland and whether or not a document is used. The consideration on which SDLT is paid is money or money's worth and where consideration is contingent it is payable on the assumption that the contingent consideration will be payable.

SDLT is also charged on any VAT included in the transaction.

If you are buying land or property in England or Northern Ireland, the amount of SDLT payable is dependent upon the purchase value as shown in the following table with a higher starting point for land in designated disadvantaged areas...

Residential Rates on purchases from 8 July 2020 to 31 March 2021

If you purchase a home (whether you are a first time buyer or have owned property before between 8 July 2020 and 31 March 2021 you will pay SDLT at the following rates:

Rate

Property Value

0%

£0 to £500,000 (see note below regarding Covid-19 temporary change)

5%

£500,001 - £925,000

10%

£925,001 - £1.5 million

12%

Over £1.5 million

The 3% supplement for purchasing additional properties still applies during this time (see below).

Covid-19: Temporary change

As announced at Summer Statement 2020, the nil rate band has been temporarily increased from £125,000 to £500,000 until 31 March 2021.

First-time buyers' relief

First-time buyers' relief applies to qualifying transactions, including purchases of shared-ownership properties, from 22 November 2017. Those claiming the relief pay no SDLT on the first £300,000 of the consideration and 5% on any remainder. Relief is not available if the total consideration is more than £500,000.

Higher rate for corporate bodies

Residential properties bought for over £500,000 are subject to SDLT at the rate of 15% where the property is acquired by a non-natural person such as a company, partnership or collective investment scheme.

Higher rates for additional properties

You'll usually have to pay 3% on top of the normal SDLT rates if buying a new residential property means you'll own more than one.

You usually have 36 months to claim a refund of the higher rates if you buy a new main residence before disposing of your previous main residence. You also have 36 months between selling a main residence and replacing it with another without having to pay the higher rates. The 36-month time limit may be extended in certain circumstances.

It was announced in the Spring Budget 2020 that an additional two percentage-point surcharge on top of all existing surcharges would be applied with effect from April 2021 to purchases of UK residential property by non-UK residents.

Grant and assignment of leases

Stamp duty land tax is applicable to both lease premiums and to the rental element of a lease.

New leasehold sales and transfers

Residential

When you buy a new residential leasehold property you pay SDLT on the purchase price of the lease (the 'lease premium') using the rates above.

If the total rent over the life the lease (known as the 'net present value') is more than £125,000, you also pay SDLT of 1% on the portion over £125,000 - unless you buy an existing ('assigned') lease.

Non-Residential

When you buy a new non-residential or mixed use leasehold you pay SDLT on both the:

  • purchase price of the lease (the 'lease premium') using the rates above
  • value of the annual rent you pay (the 'net present value')

These are calculated separately then added together.

If you buy an existing ('assigned') lease, you only pay SDLT on the lease price (or 'consideration').

The net present value (NPV) is based on the total rent over the life of the lease. You don't pay SDLT on the rent if the NPV is less than £150,000.

Net present value of rent

SDLT rate

£0 to £150,000

Zero

The portion from £150,001 to £5,000,000

1%

The portion above £5,000,000

2%

Stamp duty reserve tax

Stamp duty reserve tax is mainly dealt with by Stock exchange brokers and financial intermediaries.

SDRT is charged at 0.5% on the value of the consideration for the transfer. It is cancelled by the payment of Stamp Duty on the same transaction.

Stamp Duty

This only applies to the transfer of shares and securities and is levied at 0.5% of the value of the chargeable consideration, rounded up to the nearest £5, on each document to be stamped.

Where the consideration is £1,000 or less, these transactions will be exempt from stamp duty and will not need presenting for stamping.

How We Can Help You

For further information on any type of stamp duty please contact us.

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