Yes, you can claim for a SDLT refund if you have purchased a new main residence before selling your previous one, and then sell your previous residence with 3 years of purchase of the new one.
What is Stamp Duty Land Tax (SDLT)?
Stamp Duty Land Tax is a tax on the acquisition of land in England and Northern Ireland. Scotland charges Land and Buildings Transaction Tax and Wales charges Land Transaction Tax, instead of SDLT.
What is SDLT charged on?
SDLT is charged on land transactions in England and Northern Ireland according to the price paid or in some cases the market value. A land transaction is any acquisition of a chargeable interest. This includes not only freeholds and leases, but also interests, rights and powers over land other than exempt interests such as mortgages and licenses to use land.
Stamp Duty Land Tax FAQs
There are five different rate structures:
- “Normal” Table A Residential: 0% – 12%
- “Higher rates” Table A: 3% – 15%
- Table B Non-residential and mixed 0% – 5%
- Higher rate of 15% for non-natural purchasers of dwellings above £500,000
- First-time buyer rates: 0% up to £300,000 and 5% on balance not exceeding £500,000
|Band||Basic residential SDLT rates||Higher SDLT rates|
The threshold for paying SDLT on residential property is £125,001, unless you are a first-time buyer when it is £300,001.
If you already own another home, the threshold for the 3% higher rate of Stamp Duty on the purchase of a second or further residential property is £40,000.
Since 1 March 2019, any SDLT is payable to HMRC within 14 days of the effective date of the land transaction. The effective date is normally completion, but it can be sooner if for example, the buyer goes into occupation before completion, or they pay 90% or more of the total price to the seller ahead of completion.
SDLT is paid on “land transactions” in England and Northern Ireland. Land and Buildings Transaction Tax (LBTT) is paid in Scotland and Land Transaction Tax (LTT) is paid in Wales.
A land transaction is any acquisition of a chargeable interest in land. This is basically most interests in land, including freeholds, leases, easements and covenants and the right to receive rent. It excludes exempt interests such as mortgages or licences to use or occupy land.
When the whole or part of the consideration for a lease consists of rent, the SDLT is calculated as a percentage of the net present value of the rent. This is payable over the term of the lease at rates of up to 1% on residential leases, and 2% on commercial leases. The premium – or capital price element – of the lease consideration is charged to SDLT at the normal sale rates above.
For accounting purposes, the cost represented by SDLT can be treated as a capital expense and recorded as the cost of an asset.
Yes, you can avoid SDLT on off-plan purchases – if you pay 90% or more of the price to the developer, or if you sell your contract on to another buyer before completion or occupation.
The old stamp duty applies to land transactions that broadly speaking were carried out before 1 December 2003 (the date that SDLT was introduced), and it continues to apply to shares, bearer instruments and certain partnership transactions.
You will need to send the relevant transfer document to the Stamp Office for physical stamping if you want that document to be legally enforceable. For instance, Patrick Cannon recently advised on the stamping of a transfer arising out of a land transaction in 1846.
Patrick is authorised by the Bar Standards Board to do Public Access Work and litigation, which means that he can work directly with clients and deal directly with HMRC on their behalf. Patrick works on the basis of fixed fees agreed up-front via his Clerk and he does not use open ended hourly rates.
Do you have an SDLT or stamp duty issue that needs resolving or require advice on the liability of a past or a planned transaction? If so, please contact Patrick Cannon here for an initial discussion about the options open to you.
No, Stamp Duty cannot be paid in instalments.
Stamp Duty needs to be paid in full within 14 days of the initial transaction, or the date you completed the purchase of property. This was reduced from 30 days on 1 March 2019.
If you don’t submit a SDLT return or don’t pay the tax within 14 days, you might incur penalties and interest from HMRC.
Yes, there are many exemptions and reliefs from Stamp Duty. A transfer of land as a gift for example will not attract Stamp Duty unless there is a mortgage secured on it and the liability to repay the mortgage is assumed by the donee. Transfers between spouses and civil partners on a separation or divorce are also exempt.
Yes, but you can make a claim for Multiple Dwellings Relief, which will reduce the rates of SDLT to the rate for the average cost of each dwelling.
You may or may not also have to pay the 3% higher rate for additional dwellings, depending on the value of the dwelling – for example, granny annex or outbuildings.
Read more about Multiple Dwellings Relief here.
If you can’t afford to pay your SDLT bill in full, you have the option to borrow more from your mortgage to cover the tax bill, if your lender is willing to increase your loan.
It’s important to remember that you’ll pay interest on the extra money you’ve borrowed. With mortgages usually taken out over a long period of time (25 years or more), the costs will add up.
Furthermore, increasing your mortgage to cover Stamp Duty could affect your loan-to-value (LTV) ratio, which is the measure of how much of a property’s value you can borrow.
Most competitive mortgage offers have a maximum requirement LTV of 60%, so speak to a SDLT specialist or mortgage broker to make sure it’s the right decision for you.
No, the home buyer is usually responsible for paying SDLT, not the seller.
If you purchase a property worth £40,000 or more, you will need to file an SDLT return for HMRC, even if you do not owe any Stamp Duty.
Your solicitor or SDLT specialist will usually file this on your behalf. If you haven’t already appointed one, Patrick Cannon can assist with any matters relating to SDLT and your property purchase.
The flat rate of 15% SDLT is charged on the value of any residential property costing more than £500,000 bought by a corporate body, or non-natural person. This includes:
- Collective investment schemes
The 15% SDLT rate does not apply to property bought by a company that is acting as a trustee or that is bought to be used for:
- Property rental (buy-to-let)
- Property developers and traders
- Property for the public
- Property occupied by employees
- Financial institutions acquiring property in the course of lending
This tax rate is designed to tax properties that are bought by foreign nationals within a limited company, which would usually attract a much lower rate of Stamp Duty land tax through re-sale.
Yes, you will have to pay the additional Stamp Duty rate of 3% on top of the standard Stamp Duty bill. This is because it will be the second property owned by you, no matter how you use it.
The most likely reasons for overpaying SDLT are:
- Your conveyancer failed to make a claim for Multiple Dwellings Relief
- The property you purchased was of mixed residential and non-residential use
- The property was not a ‘dwelling’ within the legal definition, so lower rates of SDLT should have been paid.
You have 12 months from the filing date for your original SDLT return (the filing date is normally 14 days after completion of your purchase) to submit a SDLT refund claim to HMRC. In certain restricted cases, you have up to 4 years from completion to make a repayment claim.
HMRC operates a ‘process now and check later’ approach to refund claims, so that a correctly assembled refund claim will normally be repaid within 3-4 weeks.
However, refund claims from unreliable claims companies may not be paid and will be scrutinised by HMRC to check that the conditions for a SDLT refund have been met.