Stamp Duty Land Tax
Stamp Duty Land Tax (SDLT) replaces Stamp Duty tax on land transactions. SDLT is a tax charged upon the transaction not upon the document recording the transaction. The tax is chargeable upon for example sale of freehold or leasehold interests in land or on the grant of leases.
Liability for the tax is determined in the first instance by the taxpayer completing a self assessment tax return. Where we are acting for you in a conveyancing transaction we will complete and file this on your behalf. In routine cases the tax will fall due to be paid upon completion of the transaction.
The amount of SDLT payable is assessed in cases involving the purchase of an interest on land on a sliding scale.
- Up to £125,000 0%
- Over £125,000 to £250,000 1%
- Over £250,000 to £500,000 3%
- Over £500,000 to £1,000,000 4%
- Over £1,000,000 5%
If the purchase of the property means that on completion you will own more than one residential property, SDLT is payable at the rates set out above plus 3%.
If you are purchasing as a first time buyer - and intend to occupy the property as your main residence - you are entitled to a reduction in SDLT, and the rates payable are:
0% on the first £300,000 of the purchase price.
5% on the amount above £300,000.
Please note this only applies to properties less than £500,000 in value.
A first time buyer is defined as a purchaser who has not, either alone or with others, previously acquired a major interest in a dwelling, or an equivalent interest in land situated anywhere in the world. To calculate your stamp duty land tax liability please use www.gov.uk/stamp-duty-land-tax.
The acquisition of a property cannot be registered at the Land Registry without production of the appropriate certificate confirming that SDLT has been paid.
SDLT is a tax which has historically attracted many attempts at avoidance. The new Stamp Duty regime has been designed to obviate these. For this reason the scheme is complex and this note can be no more than a very basic outline.
The Revenue have extensive enforcement mechanisms which include the ability to launch an “enquiry” and to reopen self assessments of liability for a period of up to (in theory) twenty one years. Disputes as to the extent of liability are rare but can ultimately be resolved by the tax commissioners. It is a requirement to retain records of law transactions for six years after each transaction. Where instructed in a conveyancing transaction we will do this on your behalf.
If a number of “linked” transactions are progressing the value of these will be aggregated and tax payable at the rate applicable to the total sum. By way of example, a client purchases one flat for £125,000 there will be no SDLT payable. However if a client purchases 5 flats at £125,000 all from the same Vendor, SDLT will be due at 4% on £625,000- although sometimes multiple property relief can be obtained.The assessment of tax liability becomes more complex in the grant or assignment of a lease at full market rent.
The calculation of SDLT in these cases is outside the scope of this briefing note.