Stamp Duty Land Tax (SDLT) is a tax you pay to HMRC when buying a residential property.
This article provides a quick and accessible SDLT guide.
What are the basics of SDLT?
As property accountants serving thousands of UK landlords that purchase buy-to-let properties, we know that Stamp Duty Land Tax (SDLT) or Stamp Duty, sometimes referred to, can be confusing and daunting.
This article will guide you further on this topic.
SDLT is a tax paid by purchasers of land and property bought in England and Northern Ireland.
There are different regulations in place in Scotland and Wales, and we are here to guide you.
The amount of SDLT payable on a transaction is calculated based on the property’s purchase price.
Stamp Duty Land Tax was introduced in 2003 as part of the Finance Act and replaced the previous Stamp Duty.
SDLT is paid when the purchase price exceeds £125,000.
The SDLT rate ranges from 2-12% of the purchase price, depending on the value of the property bought, the purchase date, and whether the buyer is a multiple homeowner or not. Be guided by our advice.
SDLT payments are due within 14 days of the transaction date.
This is usually the date of transaction completion.
Having a handy SDLT guide available can help you.
What are the SDLT rates?
Our SDLT guide can give you valuable information on SDLT rates.
SDLT is charged on a tiered basis, so you only pay higher rates on the portion above the threshold.
For first-time buyers, no SDLT is paid up to £300,000. Then it is 5% SDLT on the amount from £300,001 to £500,000 purchase price paid on a residential property.
For homeowners replacing their main residence, zero SDLT is paid up to £125,000, then incremental increases starting from 2% for £125,0001 to £250,000.
Buy-to-let landlords, second homeowners and limited companies pay a 3% surcharge on top of residential SDLT rates. Our team can guide you more on this.
Non-UK residents and companies pay a 2% surcharge on top of residential rates. Non-UK companies must also pay the 3% surcharge.
Review our SDLT guide whenever you need to check this.
How and when is SDLT paid?
Using an SDLT guide is important when it comes to knowing how and when to pay SDLT.
Property buyers have 14 days from completion to send an SDLT return and make payment to HMRC.
SDLT forms that are submitted to HMRC are usually handled by your conveyance solicitor.
The purchaser is then entitled to take possession of the property, and your solicitor should guide you on this.
How much SDLT is paid on non-commercial properties?
Our SDLT guide highlights the differences between residential and commercial properties.
With non-residential properties, SDLT is slightly different, with 0% charged on properties with purchase prices of £150,000 or less.
A 2% SDLT charge is paid on commercial properties purchased for between £150,001 and £250,000, and 5% SDLT is due on properties purchased for £250,000 and above. Our property accountants can guide you further.
This means that non-residential properties are cheaper in terms of the SDLT liability they attract.
There are different SDLT rules for mixed-use properties.
Mixed-use refers to a property which is not exclusively residential in its use.
Perhaps it is a shop with a residential flat above it or a house with a large amount of land for agricultural purposes.
A reduced amount of SDLT may be due to a mixed-use property compared to a solely residential property.
Because the SDLT tax is self-assessed, the responsibility lies with the buyer. Professionals can guide you.
HMRC will not actively look to see if too much SDLT has been paid or if the property classification is correct for SDLT purposes.
Other factors such as the type of property, the circumstances of the buyer, and how the property was purchased all have a bearing on how much SDLT is owed.
Retain our SDLT guide for future reference on this.
It is also worth reading more on SDLT for limited companies, especially if you are a property investor.
Are SDLT rates lower for multiple dwellings?
Using this SDLT guide can help you to be aware of how to pay less SDLT on different properties.
On 2011, Multiple Dwellings Relief (MDR) was introduced, allowing for lower SDLT bills on purchases of multiple dwellings.
This was designed to encourage the private rental sector.
SDLT is calculated against the average purchase price calculated from all the transaction dwellings.
This often led to considerable savings on SDLT, and our team can guide you with specific queries on this.
However, the definition of dwellings had failed to be laid down in legislation, leading to many contentious cases and an inability for solicitors to always get it right.
In 2016 the government introduced the Additional Properties Surcharge, which placed an additional 3% surcharge on the purchaser of rental properties.
This attempted to slow down the market and give first-time buyers access to more properties.
This SDLT guide is important to review regularly.
How do I complete a Stamp Duty Land Tax SDLT1 return?
Our SDLT guide also helps landlords to complete a Stamp Duty return.
An electronic scanner reads the SDLT1 return, so it is important to make sure that you:
- only use the official HMRC print of the form
- write inside the boxes in black ink
- use capitals for each letter, figure or symbol
- leave a space between words
- mark ‘X’ in the appropriate box where given a choice
- do not use correction fluid if you make a mistake: if you can make the correction clearly, you should do so, or use a new form
- do not strike through or write ‘not applicable in any of the boxes
- leave a box blank if a question does not apply unless you are told to insert ‘o’
- do not use symbols such as £, $ #, or /
How do I claim a Stamp Duty refund?
One of the main aims of this SDLT guide is to help you make a Stamp Duty refund claim where applicable.
HMRC advises that you apply for a Stamp Duty refund by writing to the Stamp Duty Land Tax Office, including:
* the UTR number
* copy of the original SDLT return
* reason you believe it is an overpayment
* parts of the SDLT return that are inaccurate
* revised figures and confirm the amount due
* contract for the land transaction
* the relevant transfer document, lease or similar