What is Stamp Duty?
Stamp Duty is a tax charged on certain transactions. Historically the evidence of the transaction was a document which required a physical stamp e.g. a Transfer Deed of a property. The modern version of the tax no longer requires a physical stamp.
Today, the most common form of the tax that you will come across is Stamp Duty Land Tax (SDLT), when buying a property or land over a certain price.
The tax is administered through HMRC and the rate of tax paid is subject to change by the Chancellor of the Exchequer and the Government of the day.
How much Stamp Duty will I pay?
The current SDLT threshold is £125,000.00 for residential properties and £150,000.00 for non-residential land and properties. How much SDLT is paid will depend on a number of factors such as the price paid, when it is paid and how it is paid.
HMRC have a very helpful SDLT website and helpline telephone number, which can be contacted to help calculate the SDLT that will be payable. Also, as solicitors, we are able to advise on the SDLT liability in most cases.
How and when do I pay SDLT ?
SDLT is reported and paid by way of an SDLT return, which can be lodged online. You must send the return to HMRC and pay the tax within 30 days of completion of a transaction. Even if no tax is payable, there will still be situations in which a return must be completed and submitted to HMRC within this time frame. If the return is not submitted in time or you fail to make a return at all then you may be charged penalties and interest.
Part of the conveyancing service we provide as solicitors includes helping you to prepare and file the SDLT return and to forward your tax payment to HMRC on your behalf.
Change in Rules in April 2016 – What if I already own property and buy another?
Due to a change in the SDLT rules in 2016, you will usually have to pay 3% on top of the normal SDLT rates if buying a new residential property means you will own more than one.
However, you won’t pay the extra 3% SDLT if the property you are buying is replacing your main residence and that has already been sold. If there is a delay selling the main residence and it hasn’t been sold on the day you complete your new purchase then you will have to pay the higher SDLT rate because you own two properties, but you may be able to get a refund if you sell your previous main home within 36 months.
Due to the complexities of the SDLT tax rules, we recommend that you obtain legal advice in establishing the level of SDLT you will be liable to pay in your anticipated proposed transaction.