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Stamp Duty Land Tax (“SDLT”) is a tax which must be paid by the purchaser of a property. The amount of tax due is calculated in line with the value of the property or the interest being acquired in it.
Until 31 March 2016 the amount of tax payable was easy to calculate because it was simply dependent only on the purchase price of the property.
On 1 April 2016, however, the rules changed and a two-tier system of tax rates was introduced. Which rate is to be used for any transaction is now dependent on the type and purpose of the purchase with a higher rate to be paid for certain types of transaction.
The higher rate is 3% more than the original SDLT rates.
Whilst there are various situations whereby calculating the SDLT due is more complicated, the new rules can be summarised as follows:
- If the property you are purchasing will be the only property or share in a residential property that you or your spouse/ civil partner own anywhere in the world then SDLT will be payable at the original, lower rates regardless of the reason for the purchase.
- If you or your spouse/ civil partner will own more than one property, or a share in more than one property, when your current purchase completes and the property you are buying is not to be your main residence then SDLT will be payable at the new higher rate. For example, buy-to-let and holiday home purchases are taxable at the higher rate.
- If you or your spouse/ civil partner will own more than one property, or a share in more than one property, when your current purchase completes but the property you are now buying is replacing your current main residence which has either already been sold or will be sold on or before the completion date of your new purchase then SDLT is payable at the original, lower rates.
- If you or your spouse/ civil partner will own more than one property, or share in more than one property, when your current purchase completes and the property you are buying is to be your main residence but your current main residence will not have been sold by the time of completion of your new purchase then the new, higher rates will be payable for your purchase. Should you then sell your current main residence within three years of completion of your current purchase, however, you would be able to claim the additional SDLT paid back from the Revenue.
There are different rules for situations whereby the second property, or share in a property, you own has been inherited or is a share in a former matrimonial home or where the property you are purchasing has a separate annex and the annex is worth over one-third of the total property value.
An example of the difference the higher rate makes to the tax due is as follows, based on a purchase price of £180,000.00:
SDLT if main residence £1,100.00
SDLT if second property at new higher rate £6,500.00
Should you have any queries about the SDLT which may be payable on a proposed purchase then please contact our Residential Property Team at Welsh Bridge, Whitchurch or Harlescott and they will be happy to discuss this with you and provide more information.