When you’re buying a property, there are various costs to consider. Some of which can include mortgage fees and solicitors charges – as well as a potentially substantial tax on the purchase price: Stamp Duty Land Tax (SDLT). This guide will provide all the answers you need to establish who has to pay what, and when.
SDLT applies to all residential properties in England, Wales and Northern Ireland priced at £125,000 or more (and £150,000 for non-residential land and properties). SDLT applies in all cases when you buy a freehold or a leasehold (including through a shared ownership scheme) or are otherwise transferred land or property for payment. In Scotland, you’ll have to pay the Land and Buildings Transaction Tax; and buyers in Wales will have to pay the Land Transaction Tax (LTT) from 1 April 2018.
Your solicitor or conveyancer can file an SDLT return for you on completion and claim relief that you’re eligible for one. You have to send an SDLT return and pay the tax within 30 days of completion; and if your lawyer doesn’t do it, you can do it directly.
SDLT is due on the sale price of the property (even if this is paid in instalments) and including the value of non-movable fixtures and fittings (such as kitchen appliances and bathroom fittings). On a leasehold, SDLT is based on the value of the remaining lease. If you’re buying through a shared ownership scheme, you still pay SDLT on the full value of the property even if you only own a percent of it.
If you or anyone that you’re buying the property with is a first-time buyer, then you can receive a discount to pay no tax on sales up to £300,000, and 5% SDLT on the value of the property between £300,001 and £500,000 (so a property worth £350,000 would come with a £2,500 SDLT bill).
If you are not a first-time buyer then you will have pay:
0% up to £125,000
2% on the cost between £125,001 and £250,000
5% on the cost between £250,001 and £925,000
10% on the cost between £925,001 and £1.5 million
And 12% on anything over £1.5 million
Hence, a £260,000 property would incur an SDLT bill of £2,500 + £500 = £3,000
And a £1.6 million property would incur an SDLT bill of £2,500 + £33,750 + £57,500 + £12,000 = £105,750
- If you’re buying a second home then the rates come with a 3% premium at each stage (though if the buildings are in the same grounds, they’ll be treated as a single purchase; and mobile homes, caravans and houseboats are not counted as additional properties). If you’re unable to sell your first home before completing, then you will have to pay the higher rates but it is possible to then apply for a refund if a sale goes through within 36 months.
Is SDLT due on other types of properties?
If you buy non-residential land or property then you will also have to pay SDLT. This might include farmland, forests or commercial properties, and also covers transactions where you buy 6 or more residential properties simultaneously. In these cases, SDLT is charged at:
0% up to £150,000
2% on the cost between £150,001 and £250,000
And 5% on any remaining amount above £250,000
And if buying a non-residential or mixed-use leasehold, you’ll need to pay:
0% up to £150,000
1% on the cost between £150,001 and £5,000,000
And 2% on any remaining amount above £5,000,000
Who doesn’t pay?
There are various cases where you don’t have to pay SDLT:
- If no money changes hands (though the exchange of goods and services and exchanging of debt is considered a payment).
- If the property is granted to you in a will or transferred following a divorce.
- If the freehold value of the property is less than £40,000.
- If you buy a lease of 7 years or more for under £40,000 and an annual rent under £1,000; or if the payment is below the SDLT threshold.
- And, of course, if you’re selling the property.