Stamp Duty On Residential Property - Individuals
What Is Stamp Duty?
- Stamp Duty is a tax you might have to pay if you buy a residential property or a piece of land in England or Northern Ireland over a certain price.
- You will pay Stamp Duty on residential properties costing more than £250,000, unless you qualify for first-time buyers' relief.
- If you’re an eligible first-time buyer, you will pay no Stamp Duty on properties costing up to £425,000, and a discounted rate on property purchases up to £625,000.
- This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.
Who Has To Pay Stamp Duty?
It is payable by the purchaser of the property whether it be an individual, partner or a limited company.
How Is Stamp Duty Calculated?
There are several rate bands for Stamp Duty. The tax is calculated on the part of the property purchase price falling within each band. A table summarising this is shown to the left of the screen.
Purchase Of Property By First Time Buyer
If you are a first-time buyer and purchase a property for £500,000. The SDLT you owe will be calculated as:
- 0% on the first £425,000 = £0
- 5% on the remaining £75,000 = £3,750
- Total SDLT = £3,750
Purchase Of Main Home (Not First Time Buyer)
If you buy a house for £350,000, the Stamp Duty Land Tax you owe is calculated as follows under the standard rates of stamp duty:
- 0% on the first £250,000 = £0
- 5% on the portion from £250,001 and £350,000 = £5,000
- Total SDLT = £5,000
Purchase Of A Second Or More Homes
If you are buying an additional property, such as a second home you will have to pay an extra 3% in Stamp Duty on top of the standard rates - these are also known as higher rates of stamp duty.
These higher rates only apply to properties bought for £40,000 or more.
If you buy a second house for £300,000, the Stamp Duty Land Tax you owe is calculated as follows under the higher rates of stamp duty:
- 3% on the first £250,000 = £7,500
- 8% on the portion from £250,001 and £300,000 = £3,999
- Total SDLT = £11,499
If the second home your purchased was for under £40,000, no stamp duty would be payable.
When Is Stamp Duty Not Payable?
There may be circumstances where Stamp Duty may not be payable. Some examples might include:
- Transfer of property in pursuance of a court order during separation, divorce or dissolution are generally exempt. If a couple agree to separate permanently without getting a court order, they will be treated for SDLT purposes as an unmarried couple.
- Property left under the terms of a will may not be subject to SDLT provided no other consideration is given. There is usually no requirement to inform HRMC in this case.
- If you gift your home to someone else, they won’t have to pay SDLT on the market value of the property provided there is no outstanding mortgage on the property. If you take over some or all of an existing mortgage, SDLT may be payable on the value of the mortgage over the relevant SDLT threshold.
How Is It Reported & Paid To HMRC?
You must tell HMRC about most England and Northern Ireland land and property transactions using a Stamp Duty Land Tax (SDLT) return. This must be within 14 days of the ‘effective date’ of the transaction, even if you do not owe any tax. The effective date is normally the date of completion.
The filing or reporting date is also the date the stamp duty is paid over to HMRC.
The filing of the stamp duty returns, and payment off any tax is generally performed by the buyers' solicitors however it can be filed by the buyer themselves by completing a paper SDLT1 return. The paper return can be ordered from HMRC online or by phone.
Differences in Stamp Duty On Residential Property For An Individual & A Company
Companies will not get the first-time buyer reliefs available to individuals on the first property purchased. The rates of stamp duty will be chargeable at the higher rates and apply to all property purchases of £40,000 or more.
