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Property Taxation

Stamp Duty and Land Tax – SDLT Reliefs

Stamp Duty and Land Tax - SDLT Reliefs

All legal instruments in the United Kingdom are charged with stamp duty. Previously, all these documents needed an actual stamp impression on them or an attachment of the same. In the current versions of the papers, it is no longer necessary.

What is Stamp Duty Land Tax?

Tax levied on land/properties with a value more than the specified threshold in the UK is known as the stamp duty land tax. Stamp duty land tax must be paid to HMRC (Her Majesty’s Revenue and Customs). The tax should be paid within 30 days of the purchase. The rates of stamp duty land tax vary depending on the type of land/property such as non-residential, residential or for mixed purposes.

What Do the Rules Say?

Stamp duty varies depending on the location of the property/land purchased. Also, it is different if the land/property is in Scotland or Wales. The existing threshold for residential properties is £125,000 and for non-residential properties is £150,000. For the first house, there are reliefs/discounts provided, which means less/no tax if:

  • Purchase is made on or after 22nd November 2017
  • Payment made is less than £500,000
  • Buyer or their partner are first-time buyers

Tax is to be paid if you buy:

  • A freehold property
  • An existing or new household
  • The land/property through a shared ownership scheme
  • Land/property is transferred in exchange for payment such as a mortgage or buying a share in a house

Stamp Duty: Old Vs. New Rules

  • Old Rules
    • Tax brackets for purchase of residential property were:
      • Up to £125,000 – 0%
      • Up to £250,000 – 2%
      • Up to £925,000 – 5%
      • Up to £1.5 million – 10%
      • Above £1.5 million – 12%
    • To allow customers to pay the tax on the given tax brackets, ‘sliding scale’ payment was introduced in 2014.
    • In April 2016, these rules were changed for buyers who were buying it for other purposes like renting out and second-time buyers. These buyers are now supposed to pay higher rates.
  • New Rules
    • For those buying additional properties, the band has changed drastically. For properties worth:
      • £0 – £125,000 – 3%
      • £125,001 – £250,000 – 5%
      • £250,001 – £925,000 – 8%
      • £925,001 – £1.5m – 13%
      • £1.5m and over – 15%
    • New rates are going to affect a lot of buyers. Hence, a full disclosure under all circumstances is inevitable to avoid any tax avoidance problems.

When to Pay the Higher Rates?

Buyers are supposed to pay higher rates when:

  • It is the second purchase, and no replacement of the primary residence is done.
  • The primary residence is not in the UK, and the buyer is applying for more properties.
  • The main property is sold after the purchase of a second property (refund can be claimed within three years in these cases).
  • If the buyer is a couple, and one of the couples owns a property already.
  • The parents are buying a property for their children.

How to Pay Stamp Duty Land Tax?

The SDLT return must be sent to HMRC, including complete payment within 14 days of finishing the purchase. If the buyer has an agent/solicitor/conveyancer, the amount is paid by them on the day of purchase completion, and this amount is added to the fee. If you are a first-timer, you can also apply for any relief that you are eligible for. If you didn’t, you should file a return yourself and pay the tax on your own.

Who Is DNS Accountants?

DNS Accountants is an accountancy group that was formed in 2006. It is an award-winning firm with certified accountants based in the UK. DNS Accountants provides over 200 corporate clients. They offer professional services in accountancy to both companies and individuals. Services provided to companies include bookkeeping and accounting, business planning, business startup, company secretarial, corporate tax planning, fee protection service, international services, Ltd. company formations, payroll and VAT returns. The services provided to individuals include estate planning, personal tax planning, retirement strategies, self-assessment returns.

How Can DNS Accountants Help with Stamp Duty Land Tax Services?

DNS Accountants provides mergers and acquisitions services, business planning, corporate tax planning and business startup services to companies. These include land acquisition and sale. DNS Accountants also assists in filing tax returns and calculate the tax payable to HMRC. It can help in gaining more returns in line with the current tax laws.

DNS Accountants provides estate planning services for personal uses through:

  • Proper distribution of the estate to beneficiaries
  • Prevention of crippled inheritance tax
  • In the case of indecisions on the buyer’s side, DNS Accountants protects the property from being frozen.
  • Safeguarding the assets considering long-term costs for caring
  • Administering the estate of buyers

For further queries regarding the stamp duty and land tax, get in touch with us on 020 3500 2646

About the Author:

Sumit Agarwal
, A specialist accountant and tax adviser for freelancers, contractors and small businesses since 2005, He is an expert in business growth and development strategies. A renowned tax expert for owner managed businesses and contractors, He won the British Business Forum’s Young Entrepreneur Award in September 2012, presented at the House of Commons by MP Vrinder Sharma.