When purchasing property in the UK, there are different ways that Stamp Duty Land Tax (‘SDLT’) is calculated. We explain the different types of scenario below.
Those who have not owned property before are entitled to apply for first-time buyer relief. This means that they will not pay SDLT on properties worth less than £300,000. This is provided that all buyers fulfil the following qualifying criteria:
- All purchasers have not owned property before (regardless of the location);
- All purchasers have completed their declarations and provided them to their conveyancer; and
- The purchasers will occupy the property and treat it as their main residence and not as a buy to let or for any other purpose.
First-time buyers purchasing a property for over £300,000, but under £500,000 will pay SDLT at 5% for the amount above £300,000. Unfortunately, first-time buyers purchasing a property for £500,000 or above will lose their entitlement completely and HMRC will treat them as if they previously owned property.
Please note that if you inherited property prior to your first purchase, you may not have a right to claim the relief and will no not be classed as a first-time buyer.
Those who have owned a property previously will not be entitled to claim any form of relief. Therefore, you will need to pay the appropriate percentage based on the purchase price. This will impact on the amount you are required to pay. The government website has a SDLT calculator that can work this out for you.
Second property owners
Those who, on completion, will own more than one property (anywhere in the world) will be expected to pay additional 3% above the usual payable SDLT amount.
However, if you sell your previous main residence within 36 months of the date your purchase completes, you may be entitled to claim back the extra stamp duty from HMRC. This is provided that your new property is classed and treated as your main residence.
How to pay your Stamp Duty Land Tax
Ordinarily, your conveyancing solicitor will prepare the land transaction form and submit it following the completion. Where payment is required, they will be expected to pay the required amount to HMRC within 14 days. If the payment is not made within 14 days, there will be a £100 penalty and possibly interest to pay.
Please note that your solicitor will require you to sign a declaration confirming your position regarding the stamp duty. If there are any changes during your transaction, you must inform your solicitor as this may impact on the amount you are required to pay.