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Residential Conveyancing: What is Stamp Duty Land Tax (SDLT) Fees?

Property transactions on freehold, leasehold property is subject to Stamp Duty Land Tax. But the charges are different depending on the value of the transaction. This tax should be paid within 30 days to the HMRC. Not paying the stamp duty land tax shall attract penalty by way of fines. The client and his solicitor may face prosecution.

Rates of SDLT

Residential Freehold Property:

When residential freehold property is transferred, the following stamp duty land tax is applicable at the following rate:

  • When the purchase price does not exceed £125,000 , tax  is not required to be paid.
  • When the purchase price is more than £125,000, but is not more than £250,000, the tax is payable at 1% of the price at which it is purchased.
  • When the purchase price is more than £250,000, but less than £500,000, the tax is payable at 3% of the price at which the property is purchased.
  • When the purchase price is more than £500,000, the tax that is payable is 4% of the purchase price.
  • When the purchase price is more than £1,000,000, the tax that is payable is 5% of the price at which the property is purchased.

In the case of disadvantages areas, the threshold is set at £150,000. The solicitor should check if the property is situated in a disadvantaged area and if the tax relief can be successfully claimed. The HMRC’s website is the best reference to help people check if their home falls in the disadvantages area.

People buying property as their main residence for the first time or those planning to purchase a leasehold interest with more than 21 years left to complete can claim stamp duty land tax relief if the deal is completed between 25th march 2010 and 24th March 2012. First time buyers who can satisfy all the qualifying conditions need not pay the stamp duty land tax when the property is purchased at a price not more than £250,000.

Non-Residential or Mixed Use Freehold Property:

When non-residential or mixed use freehold property is transferred, the following SDLT rates will apply:

  • When purchase price of property is not more than £150,000, tax is not required to be paid.
  • When property is purchased at more than £150,000, but less than £250,000, the tax to be paid is 1% of the price at which the property is purchased.
  • When property is purchased at more than £250,000, but less than £500,000, the tax to be paid is 3% of the price at which the property is purchased.
  • When property is purchased at more than £500,000, the tax to be paid is 4% of the price at which the property is purchased.

The tax is payable on the entire price. For example, if a person buys a residential property for £125,000, no tax will be incurred, but when the property is purchased at £126,000, a tax of £1,260 is payable. If VAT is charged, the stamp duty land tax is to be paid on the amount that includes VAT.

Apportionment of Stamp Duty Land Tax

SDLT is payable only on the land and does not include belongings. If the sale includes property as well, it is possible that tax can be reduced by assigning some of the price to the property in the sale. The amount allocated to the property must be fairly reflected on the value or both the solicitor and his client shall be prosecuted under criminal charges. Citing the example mentioned above, if £1,000 is allocated to the purchase of carpets and other such similar things, this would reduce the price of the land to £125,000 and thus tax is not required to be paid.

Photo courtesy: Capt’ Gorgeous

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