Stamp Duty Land Tax

Stamp Duty Land Tax is payable by the purchaser in a land transaction which includes a simple conveyance of land such as buying a house but also creating a lease or assigning a lease. If you are considering property investment or acquiring a lease on a commercial property in the Chesterfield area we, at Page Ivy, can help you to make property acquisitions in a tax efficient manner.

Who pays the tax?

SDLT is payable by the purchaser in a land transaction occurring in England and Northern Ireland. For land transactions occurring in Scotland, Land & Buildings Transaction Tax (LBTT) applies and in Wales land transactions are chargeable to Land Transaction Tax (LTT).

What is a land transaction?

A transaction will trigger liability if it involves the acquisition of an interest in land. This will include a simple conveyance of land such as buying a house, creating a lease or assigning a lease.

When is the tax payable?

The tax has to be paid when a contract has been substantially performed. In cases where the purchaser takes possession of the property on completion, that will be the date. However, if the purchaser effectively takes possession before completion - known as ‘resting on contract’ - that will be regarded as triggering the tax.

How much tax is payable on residential property?

Each SDLT rate is payable on the portion of the property value which falls within each band.

SDLT rates

The current rates are as follows:

Residential property
Purchase price of property
Band %
Rates
£0 - £250,000 0
£250,001 - £925,000 5
£925,001 - £1,500,000 10
£1,500,001 and above 12

First-time buyer relief

First-time buyers may be eligible for first-time buyer relief on purchases of residential property up to £625,000. The rates apply to the portion of the total value which falls within each band.

Each SDLT rate is payable on the portion of the property value which falls within each band. The rates and thresholds (from 23 September 2022) are:

Property value Band % Rates
£0 - £425,000 0
£425,001 - £625,000 5

No relief can be claimed if the property is over £625,000.

First-time buyers relief for qualifying shared ownership

First-time buyer relief applies to purchasers of qualifying shared ownership properties who do not elect to pay SDLT on the market value of the whole property when they purchase their first share. Relief will be applied to the first share purchased, where the market value of the shared ownership property is £625,000 or less.

Additional residential properties

Higher rates of SDLT are charged on purchases of additional residential properties (above £40,000).

The main target of the higher rates is purchases of buy-to-let properties or second homes. However, there will be some purchasers who will have to pay the additional charge even though the property purchased will not be a buy-to-let or a second home. The 36 month rule set out below helps to remove some transactions from the additional rates (or allow a refund).

The higher rates are three percentage points above the SDLT rates shown in the table above. The higher rates potentially apply if, at the end of the day of the purchase transaction, the individual owns two or more residential properties.

Some further detail:

  • Purchasers will have 36 months to claim a refund of the higher rates if they buy a new main residence before disposing of their previous main residence
  • Purchasers will also have 36 months between selling a main residence and replacing it with another main residence without having to pay the higher rates
  • A small share in a property which has been inherited within the 36 months prior to a transaction will not be considered as an additional property when applying the higher rates
  • There will be no exemption from the higher rates for significant investors.

What about non-residential and mixed property?

The rates for non-residential and mixed property are set out in the table below.

The SDLT rates are payable on the portion of the property value which falls within each band.

Non-residential and mixed Band %
Rates
£0 - £150,000 0
£150,001 - £250,000 2
£250,001 and over 5

More than one dwelling

There is a relief available for purchasers of residential property who acquire interests in more than one dwelling at the same time. Where the relief is claimed the rate of SDLT is determined not by the aggregate consideration but instead by the mean consideration (ie by the aggregate consideration divided by the number of dwellings) subject to a minimum rate of 1% on the total.

SDLT surcharge on non-UK residents

There is a 2% SDLT surcharge on non-UK residents (and certain UK resident companies that are controlled by non-UK residents) purchasing residential property in England and Northern Ireland.

Are there any exemptions?

Yes. There are a number of situations in which the transfer of land will not be caught for SDLT. These include:

  • a licence to occupy
  • a gift of land
  • transfers of land in a divorce
  • transfer of land to a charity
  • transfers of land within a group of companies where an SDLT group relief claim is made.

What is the tax charged on?

Tax is chargeable on the consideration. This will usually be the actual cash that passes on the sale. However the definition is very wide and is intended to catch all sorts of situations where value might be given other than in cash: for example, if the purchaser agrees to do certain work on the property.

How does the tax work on leases?

If an existing lease is purchased, SDLT is calculated in the same way as the purchase of a freehold property. If a lease is created for the payment of a premium ie a lump sum in addition to any rent, then the amount of the premium is the consideration subject to SDLT and is also calculated in the same way as the purchase of a freehold property.

However, there is also a potential charge to SDLT on the rental element. The calculation takes account of various factors including the rent that will be paid under the lease. If the calculated value exceeds £125,000 for residential property and £150,000 for non-residential, the excess is charged at 1%.

A 2% rate applies to rent paid under a non-residential lease where the NPV of the rent is above £5 million.

The government has SDLT calculators which work out the amount of SDLT payable. The calculators can be found here.

How do I tell HMRC about a liability?

The purchaser must complete an SDLT1 return and this must be submitted to a special HMRC office within 14 days of the transaction. The purchaser must also send a cheque for the tax at the same time so this means that they have to calculate the tax due. A late return triggers an automatic penalty of £100, and late payment of the tax will mean a charge to interest.

What will HMRC do then?

A certificate will be sent to the purchaser to show that they have paid the tax. This certificate is required to change the details of the property ownership at the Land Registry. The fact that HMRC has given the purchaser a certificate does not mean the SDLT calculations are agreed. HMRC has nine months in which to decide whether or not to enquire into the return and challenge the figures.

How we can help

If you are planning to enter into an arrangement to purchase land, in the Chesterfield area we can advise you of the precise impact of Stamp Duty Land Tax on the transaction so please contact us at Page Ivy. We can also help you complete the SDLT1 and submit it to HMRC.

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After completing her A-Levels in 2017, Rebecca started her career in accounting by joining the Page Ivy team. Since then she has completed levels 2 and 3 of the AAT qualification and is currently studying towards level 4.

In the office, Rebecca works with our clients to assist them in preparing their VAT returns, assists with Xero Cloud-based bookkeeping and Accounting and is also trained in all matters of payroll.

In her spare time, Rebecca likes to, spend time with her friends and family, train dogs and more recently, has started to learn Spanish.

Since school Charlie has always had an interest in accountancy and followed up on his career aspirations by joining Page Ivy in 2017.

After three years of studying, Charlie is nearing completion of his AAT level 4 qualification and is looking to start his ACCA training imminently.

Charlie deals with the preparation of Limited Company, Sole trader and Partnership accounts along with preparing VAT and MGD returns.

In his spare time, Charlie enjoys watching football and spending time with his partner, friends, and family.

Danielle joined the Page Ivy team back in 2013 as an AAT Trainee, now qualified she is responsible for managing our Payroll  Bureau.

Her role includes processing weekly, bi-weekly, and monthly payroll runs, corresponding with HMRC on behalf of our clients,  preparing and submitting CIS 300 returns, assisting clients with all areas of payroll, HR, and Administration.

In her spare time, Danielle enjoys climbing, spending time with family and friends, and going on long country walks with her partner and dog.

Declan is the newest member of the Page Ivy team, starting with us in 2020.

Declan is currently studying towards level 2 of his AAT Apprenticeship and in the office, is getting to grips with data entry and analysis.

In his spare time, Declan enjoys country walking with his family and dog, sports events and more recently, learning to play the piano!

Megan joined our team in 2014 and has been ensuring that the Page Ivy office runs smoothly ever since.

Her role includes managing the team and their diaries,  handling client queries, and assisting with Administration.

Megan is a Xero certified Payroll advisor, meaning that when Danielle is on leave, Megan is on hand to run our payroll department.

Megan has two children, Isabella and Felicity, who like to keep her busy! In her spare time, she likes to keep fit, spend time with her family and online shop!

Abby started her career in accounting in 2009, working for a small practice in Chesterfield, alongside studying for her AAT qualification.

After three short years, in 2012 the opportunity arose to become Director of Page Ivy Accountants and she hasn't looked back!

Building long-lasting client relationships are of utmost importance to Abby, she has a passion for providing a high level of customer service and ensuring that our clients feel valued.

Abby is responsible for overseeing the preparation of VAT returns and MGD return prepared by the Page Ivy team; along with providing personal tax advice to a wide range of clients.

 

In her spare time, Abby enjoys, traveling, reading, and going to the gym.

Edward joined the team as a school leaver in 2012.  From here he went on to study Business Administration, AAT, and finally progressed on to complete his  ACCA qualification 2019.

Edward is a knowledgable, pro-active Senior accountant, who prides himself on providing high quality, in-depth, technical advice in a manner that is easily understood by his clients.

He is responsible for the preparation of Sole trader, Partnerships, and Limited Company accounts. As well as monthly and quarterly management accounts and conducting business reviews.

In his spare time, Edward likes to spend time with his friends and family,  spending time in his local pub and watching Derby FC collect 3 points.

 

Gareth started his career in accountancy in 2002. Since then he has worked in both small and medium-sized accountancy practices, working with a variety of clients from small businesses to advising quoted companies on Corporate Tax compliance and specialist claims, such as for Research and Development allowances. He places high importance on technical expertise, believing this to be essential to ensure clients can be safe in the knowledge they are fully compliant with HMRC’s requirements while minimising their tax liabilities. This is reflected in him being a fully qualified member of the Chartered Institute of Taxation, and a fellow of the Institute of Chartered Accounts in England and Wales.

He joined Page Ivy in 2012, since then he has taken responsibility for overseeing the preparation of clients Sole Trader, Partnership and Limited company accounts, as well as clients personal Self Assessment Tax Returns.

Alongside Abby he hopes to continue to develop both the technical expertise within the firm, and see the business continue to grow from strength to strength.

Outside of work Gareth has served as deputy leader of the town council, enjoys eating out, and fishing.

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