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All about Stamp Duty Land Tax (SDLT)

24.08.2021

By Beehive Money

49

So, what’s stamp duty all about?

It’s a tax the Government introduced in 2003. It’s basically a charge on ‘land transactions’, and applies to purchases of:
  • both freehold and leasehold property
  • shared ownership property
  • residential and commercial property
  • land
In this guide, we’ll explain how stamp duty works and what you might have to pay.

How much does stamp duty cost?

It all depends on when you’re planning to buy a property. That’s because the UK Government suspended stamp duty (also called the ‘stamp duty holiday’) to help homebuyers during the Coronavirus pandemic. It’s now being steadily reintroduced, so depending on the purchase price of your property, you might have to pay it. You’ll be charged stamp duty on any property purchases between 1st July 2021 and 30th September 2021 costing the below or more:
  • £250,000+ for residential properties
  • £150,000+ for non-residential land and properties
  • £300,000+ for first-time buyers
And from 1st October 2021:
  • £125,000+ for residential properties
  • £150,000+ for non-residential land and properties
  • £300,000+ for first-time buyers

What will I need to pay?

Right now, stamp duty is on a reduced rate and on a sliding scale, which means some homebuyers could pay less than usual. Here’s how it’s broken down for (non-first-time buyer) freehold properties, for the period running from 1st July to 30th September:

 Property Value
 SDLT Rate
 Up to £250,000
0%
 The next £675,000 (the portion from £250,001 to £925,000)
 5%
 The next £575,000 (the portion from £925,001 to £1.5 million) 
 10%
 The remaining amount (the portion above £1.5 million) 
 12%
It might sound complicated, but it’s actually quite simple. As an example, if you were to buy a property now for £260,000, you wouldn’t pay any stamp duty on the initial £250,000. But, for the remaining £10,000, you’d need to pay a rate of 5% – just £500. 

If you’re a first-time buyer you won’t have to pay stamp duty on the first £300,000 of your house purchase unless you’re buying a property worth over £500,000. If this is the case, you’ll follow the same rules as someone who’s bought a house before.  

However, stamp duty will be going back to its normal rates from 1st October 2021. Here’s what you can expect to pay then:
 Property Value
SDLT Rate
 Up to £125,000
 0%
 The next £125,000 (the portion from £125,001 to £250,000) 
 2%
 The next £675,000 (the portion from £250,001 to £925,000) 
5%
 The next £575,000 (the portion from £925,001 to £1.5 million) 
10% 
 The remaining amount (the portion above £1.5 million) 
 12%

This time, your £260,000 property price would be liable for 2% Stamp Duty on £125,000 (£2,500), plus 5% on the remaining £10,000 (£500) for a total of £3,000. For first-time buyers, the rules won’t change. 

How does it work for leasehold properties?

You’ll pay the rates shown above on the purchase price of the lease. But, if the rent for that property is more than the stamp duty threshold, you’ll pay 1% of that proportion. This equates to:
  • £250,000 for the period from 1 July 2021 to 30th September 2021
  • £125,000 for purchases from 1st October 2021
It’s worth checking the GOV.uk website about leases, as assigned leases (ones that are sold to third parties) work differently.

How can I work out what to pay?

The Government has a handy Stamp Duty Land Tax calculator. It asks a few questions before you start, like whether your new property will be freehold or leasehold, so it’s a good idea to have all the info you need to hand before making a start. You can find the calculator on the Government website, here.

When do I need to pay Stamp Duty?

Whatever property you purchase, and whether you’re liable for stamp duty or not, you’ll need to submit a Stamp Duty Land Tax return to HMRC within 30 days of completion. There’s a penalty of £100, plus interest, if you don’t file this – even if you don’t need to pay the stamp duty. In most house sales, your solicitor will sort out the return and fees, but it’s worth checking with them for peace of mind.

Can I reduce my stamp duty?

Sometimes, like if you transfer your home’s value (for instance in a divorce) or the deeds (either as a gift or in your will). The GOV.uk website has lots of helpful advice about the types of situations where you might be able to reduce or (negate?) stamp duty, as well as scenarios where you might need to pay more (such as if you own more than one property, or you’re a non-UK resident).

How can I save up for a new home?

At Beehive Money, we help you save for a brighter future. Whether it’s a first home, savings for a rainy day or something else, check out our accounts and savings tips.

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