If you’re wondering how Stamp Duty is calculated and in what situations you can claim relief, read today’s tax tip!
We will cover:
- What is Stamp Duty and how it’s calculated
- In what situations you can claim relief
What is Stamp Duty Land Tax (SDLT)?
SDLT is paid when purchasing land or property in England or Northern Ireland.
HMRC calculates SDLT based on the chargeable interest in land. This includes:
- an estate, interest, right or power in or over land
- the benefit of an obligation, restriction or condition affecting the value of the above.
What are the SDLT rates?
SDLT rates vary depending on whether property is residential or non-residential.
Some examples of non-residential property are:
- commercial property
- agricultural land
- six or more dwellings bought in the same transaction
- mixed-use property which includes both residential and non-residential elements
SDLT is based on rates, making it similar to how Income Tax is calculated. In Stamp Duty, the value of the property determines how much you pay.
An additional 3% is paid when a dwelling is worth more than £40,000, and purchased by a non-natural person as a second home or as an investment.
A non-natural person includes:
- partnerships which include companies
- collective investment schemes
Non-natural persons are charged the higher 15% rate of SDLT when purchasing property over £500,000.
First-time buyers receive a discount of 3% if they purchase a home of £500,000 or less.
What is exempt?
Here are a few examples:
- when there is no chargeable consideration
- a tenancy at will
- transactions connected to divorce or dissolution of a civil partnership
- grants of certain leases by registered social landlords
What are the reliefs available?
Depending on the nature of transaction, you can get SDLT relief. These include:
- first-time buyers
- multiple dwellings relief (MDR)
- six or more dwellings
- zero-carbon homes
- transfers between companies
- crown employees
- building company buys an individual’s home
- employer buys employee’s house
- property developer subject to planning obligations
- relevant housing providers
Those who purchased their first home on or after 22 November 2017 pay a reduced rate.
Multiple dwellings relief (MDR)
MDR allows SDLT to be calculated on the average value of multiple properties. If you buy two or more dwellings in the same transaction or a series of linked transactions, you can claim relief.
Six or more dwellings
If you buy six or more dwellings in the same transaction, it will count as a non-residential property transaction. For this reason, different rates of SDLT apply making you eligible for relief.
A zero-carbon home has features that make it more energy efficient (such as those that interfere with consumption, conservation and production of energy). Total relief is available if the chargeable consideration is no more than £500,00.
Transfers between companies
Companies can claim SDLT relief if they transfer property between themselves.
Non-UK residents who are employees of the Crown can claim relief from the 2% non-resident Stamp Duty surcharge.
Qualifying freeport land is exempt from SDLT.
Building company buys an individual’s home
If a building company receives a home in part exchange for a new home they are selling, the building company can claim SDLT relief.
Employer buys employee’s house
If an employer or property trader purchases an individual’s house, they are exempt if certain conditions apply.
Property developer subject to planning obligations
If a developer has planning conditions to provide amenities to a community, SDLT relief can apply to that land transaction.
If charities purchase land for charitable purposes, they can claim relief.
Relevant housing providers
A relevant housing provider can claim SDLT relief if the seller is a qualifying body, such as a local council.
If you believe you have overpaid SDLT, call us for a consultation. We provide Stamp Duty tax advice and can let you know whether you can claim relief.
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Kind regards Ilyas