It’s probably not the first thing on your mind if you’re selling your property, but the chances are that you’ve heard of something called Stamp Duty Land Tax and it’s very likely it will be payable on your sale. Find out here what SDLT is, the rates and thresholds, and how you pay it.
What Is Stamp Duty?
Stamp Duty Land Tax is basically a tax that is put on property and land transactions over a certain value. It is commonly referred to as just stamp duty but it should not be confused with other types of stamp duty, such as the tax that is charged on shares. SDLT was introduced by the 2003 Finance Act, and largely replaced the previous form of stamp duty.
How Much Does It Cost?
Stamp duty is payable on property and residential land transactions over the value of £125,000. The rate of duty varies according to the price of the transaction and can also be affected by other circumstances. See the table below for the different thresholds and rates.
|Purchase price/lease premium or transfer value||SDLT rate|
|£500,001-£1 million||4 %|
|Over £1 million-£2 million||5 %|
|Over £2 million||7 %|
|Over £2 million (bought by corporate bodies)||15 %|
If the property is in an area classified by the government as ‘disadvantaged’ then a higher threshold of £150,000 applies, but otherwise the rates remain the same.
There are a couple of situations in which you would be exempt from stamp duty. One of them concerns property that is left in a will, and the other is if, during a divorce or separation, one partner is transferring their share of the property to the other person, then they do not need to pay the SDLT on it.
When Do I Pay Stamp Duty?
When purchasing a property for over £125,000, the stamp duty is normally payable within 30 days of the ‘effective date’ (usually the day of completion). However, there are a couple of instances when the stamp duty will be payable earlier. If you pay for the property or move into it before completion, the 30-day period will begin on this earlier date.
How Do I Pay Stamp Duty?
When you buy or transfer or a property, or take on a lease, you need to notify HM Revenue & Customs by completing a Stamp Duty Land Tax return. The simplest way to do this is online but you can fill out a paper form if you prefer. If any stamp duty is due, then you send the payment at the same time.
Payment can be made by card, bank transfer, at your bank by giro, at the post office or by cheque in the post. Most people get a solicitor to do this for them in their name, but legally it’s your responsibility to notify HMRC and pay any SDLT due. Once you’ve completed your tax return, you’ll receive a certificate – an SDLT5 – which you need in order to register the property with the Land Registry.