Stamp Duty Land Tax (also known as SDLT or just Stamp Duty) is a type of tax payable on the purchase of land or property in the UK. It is payable to HMRC and the amount payable depends on the value and type of transaction. Your solicitor will be able to advise the level of stamp duty payable, and it is normally paid by your solicitor on completion of the purchase.
If you are purchasing a residential property, it is important to consider the level of stamp duty. Stamp duty will be in addition to the purchase price of the property and could increase the cost of purchasing for you. You can calculate the stamp duty online to help you budget.
It is also worth noting that any extras you purchase when buying a New Build property will be added to the value of the property for stamp duty purchases. Our previous article explains this in further detail.
The residential property rates depend on whether you are going to own one property or more:
a) Single property rates
These will apply if you are either purchasing your first property or if you are selling your current property and replacing it with a new one. The current threshold is £125,000 therefore you will only pay the stamp duty tax if your purchase price is £125,001 or above. Stamp duty is charged on the element of the purchase price above £125,000.
The SDLT rate increases with the value of the property as follows:
|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%|
If you buy a house for £275,000, the stamp duty you will pay is calculated as follows:
- 0% on the first £125,000 = £0
- 2% on the next £125,000 = £2,500
- 5% on the final £25,000 = £1,250
- Total stamp duty = £3,750
This applies for both freehold and leasehold properties as well as any transfers of properties for consideration.
b) Multiple property rates
If you own more than one property at the time of your purchase, you are likely to have to pay an additional rate of stamp duty. On top of the normal rates (above), there is an additional 3% of the purchase price payable. There is no minimum threshold for additional properties. This means that at the very least you will have to pay stamp duty at 3%.
If you own a home and buy a 2nd home for £275,000, the stamp duty you will pay is calculated as follows:
- 3% on the first £125,000 = £3,750
- 5% on the next £125,000 = £6,250
- 8% on the final £25,000 = £2,000
- Total stamp duty = £12,000
The rules for additional stamp duty are slightly more complex, and exceptions and exclusions may apply in some circumstances.
Commercial property includes shops, offices, agricultural land and any other property not used as a residence. Stamp duty on commercial properties works slightly differently. Again, it is payable in many transactions where there is a long lease, transfer or purchase, but it is unlikely to apply if for example you entered into a short term business lease, paying an annual rent (providing the annual rent does not exceed the threshold).
The threshold for commercial property is £150,000. A rate of 2% is payable up to £250,000 and 5% above £250,000.
There are some exemptions or reliefs which may reduce or negate your stamp duty liability. Multiple dwellings relief is available if you are purchasing multiple properties reducing your overall stamp duty payable. Also, company transfers and charities as well as local authorities can apply for relief.
Your solicitor will advise you on the amount of stamp duty due, and whether you can obtain any relief. For further information, contact our commercial or residential property solicitors on 0800 988 7756.