Back to Basics: Stamp Duty Land Tax

27 Apr 2012

Various rules apply for working out how much, if any, SDLT is payable. The calculation - which is based on a value called the 'chargeable consideration' - can vary depending on whether the land is residential or non-residential, freehold or leasehold, or on other factors such as whether several transactions are linked.

There are also some types of transactions that are exempt from SDLT, or where reliefs can reduce the amount payable.

SDLT rates and thresholds

Broadly speaking, SDLT is charged as a percentage of the amount paid for property or land when it is bought or transferred - unless there is a relief or exemption.

Higher percentage SDLT rates apply to higher-value transactions. The amount payable can also vary depending whether the property is being used for residential or non-residential purposes, and whether the property is sold as a freehold or leasehold. The rates below applies for all freehold residential purchases and transfers and the premium paid for a new lease or the assignment of an existing lease

• Purchase price up to £125,000 - 0%
• Purchase price from £125,000 to £250,000 - 1%
• Purchase price from £250,000 to £500,000 - 3%
• Purchase price from £500,000 to £1 million - 4%
• Purchase price over £2 million - 7%
• Purchase price over £2 million (purchased by certain persons including corporate bodies) - 15%

If the value is above the payment threshold, SDLT is charged at the appropriate rate on the whole of the amount paid. For example, a house bought for £130,000 is charged at 1 per cent, so £1,300 must be paid in SDLT. A house bought for £350,000 is charged at 3 per cent, so SDLT of £10,500 is payable.

SDLT reliefs and exemptions

Reliefs: Some transactions are entitled to SDLT relief. In these situations you can claim the relief when you complete the SDLT return.

SDLT relief is also available for properties meeting certain strict criteria. For example, new houses that meet 'zero carbon' standards for energy efficiency have an SDLT threshold of £500,000

Exemptions: There are some land and property transactions that don't need to be notified to HMRC because they are exempt from SDLT. Read our guide below to find out more.

What value is SDLT charged on?

SDLT is charged on the total value of what's known as 'the chargeable consideration'. The chargeable consideration includes everything of economic value given in exchange for the property - so as well as a payment of money, it can include a release from a debt, the transfer of an existing mortgage, or the provision of other services.

Most residential property purchases: For a straightforward residential property purchase, calculating SDLT is usually easy. The chargeable consideration is simply the purchase price (excluding the value of any extras such as carpets or furniture which are not counted as fixtures and fittings) so you apply the relevant SDLT threshold and rate to the purchase price

Other types of transaction or new leases with significant rent: Calculating SDLT for other types of transaction or for new leases can be a bit more complicated. In these cases HMRC provides online calculators to help you.

Completing an SDLT return

Unless a transaction is exempt from SDLT, the purchaser is responsible for notifying HMRC of the purchase or transfer by completing a Land Transaction Return - commonly referred to as the SDLT Return - and for making sure that SDLT is paid on time. In practice, most people employ a solicitor or conveyancer to complete the return for them.

When HMRC receives a valid return, it will issue a Stamp Duty Land Tax Certificate. The transfer of the property cannot be registered at the land registry without this certificate.

All transactions valued at £40,000 or more, must be notified to HMRC within 30 days of the 'effective date' of the transaction (for most land and property purchases this is the completion date). If the transaction value is above the payment threshold, you also need to send payment within this time limit.

If the return and payment aren't received within 30 days, the purchaser will incur a penalty charge and will also be charged interest on the overdue payment.

The quickest and easiest way to file a return is online (most SDLT returns are now submitted this way). There are many benefits to using this method. For example, unlike the paper return, you will be presented only with the questions relevant to your situation. You will also receive an automatically generated Land Transaction Certificate that you can send straight off to the Land Registry

Online filing helps make sure that you complete the return and pay the correct tax on time.

Natasha Brar
Sales Consultant - Oxford City & Villages, Residential Sales 
01865 759500 / natasha@scottfraser.co.uk  

Source: HMR&C