GUIDE TO STAMP DUTY IN ENGLAND AND WALES

HOW MUCH STAMP DUTY WILL I PAY ON MY PROPERTY PURCHASE?

If you are buying a property in England or Wales and the purchase price is more than the current £125,000 threshold you will be liable to pay Stamp Duty Land Tax (SDLT). This is a Government tax which applies to property and land whether freehold or leasehold.

The amount of Stamp Duty Land Tax which you pay depends upon the purchase price of the property. The table below shows the different rates and you only pay the duty on the rate in that price band.

Minimum property purchase price Maximum property purchase price Stamp Duty rate
£0 £125,000 0%
£125,001 £250,000 2%
£250,001 £925,000 5%
£925,001 £1.5 million 10%
Over £1.5 million 12%

For example, if your new home costs £175,000 you’ll pay £0 SDLT on the value below £125,000 and 2% on the value above £125,000 i.e. £50,000 at 2% = £1,000.

All CMS quotes include the correct amount of Stamp Duty which is calculated on the purchase price you have input for your quote.

HOW MUCH STAMP DUTY LAND TAX WILL I PAY ON MY ‘RIGHT TO BUY’ PURCHASE?

Stamp Duty Land Tax is payable on the amount you are paying for the property after any discount has been deducted

HOW MUCH STAMP DUTY LAND TAX WILL I PAY ON MY SHARED OWNERSHIP PURCHASE?

There are two types of Shared Ownership scheme and the SDLT is applied differently depending upon the scheme you are buying through:-

1. Shared Ownership schemes operated by an ‘Approved Qualifying Body’. In England and Wales these are:

• A local housing authority
• A housing association
• A housing action trust
• The Commission for the New Towns
• A Development Corporation

These schemes are often described as Newbuild Homebuy or Social Homebuy.

HOW IS SDLT calculated on a shared ownership lease operated by an ‘Approved Qualifying Body’?

When you purchase a shared ownership property, even if the property is freehold, you will be purchasing a leasehold interest in that property. If the property you intend to buy is a freehold then the scheme will own the freehold and they will grant you a lease of your share. Should you buy further shares so that you eventually own the whole property the freehold is transferred to you at that time and the leasehold ceases to exist.

When you buy a share in a property through an approved qualifying body shared ownership scheme you may have to pay SDLT if the value of the property exceeds the current Stamp Duty threshold of £125,000.

The rules are complex and your solicitor will be able to advise the best option for you.

There are two payment options:
• You may make a one-off payment based on the total market value of the property, or
• You may pay any SDLT due in stages as you purchase additional shares of the property

If you decide to make a one-off payment up front this is known as making a ‘market value election’ for SDLT.

If you choose to pay SDLT in stages then you pay the sum due on the initial purchase amount i.e. anything over £125,000.

After that you don’t have to make any further payments until you own more than an 80 per cent share of the property.

Choosing the option most beneficial for you can be complex but your solicitor will be able to advise you on this.

2. Shared ownership or shared equity schemes by private sector schemes

These schemes allow a property to be bought with the aid of an equity loan repayable when the property is sold. Examples are HomeBuy Direct and the First Time Buyers’ Initiative. In this case SDLT is calculated on the market value of the property and an SDLT return is completed and payment made in the usual way.

DO I HAVE TO PAY STAMP DUTY LAND TAX IF I TRANSFER SHARES IN MY PROPERTY?

If you are not buying a property but are receiving a share or all of a property then you may have to pay Stamp Duty Land Tax. The transaction is called a Transfer of Equity.

SDLT EXEMPTIONS

1. SDLT IS NOT PAYABLE ON A TRANSFER OF EQUITY FOR NO VALUE

Where no money or monetary worth is changing hands and there is no mortgage on the property then you are exempt from paying SDLT as this is classified as a ‘gift’ and is exempt from SDLT

2. SDLT IS NOT PAYABLE ON INHERITED PROPERTY

If you inherit a property, even if you take over an existing mortgage, no stamp duty is payable

3. SDLT IS NOT PAYABLE FOLLOWING, DIVORCE, SEPARATION OR THE END OF A CIVIL PARTNERSHIP

If an interest in land or property is transferred to one or other of the couple as part of an agreement or court order because they’re:

• going through divorce proceedings
• taking action to dissolve a civil partnership

This also applies if the partners agree to either:

• the annulment of their marriage
• a legal separation

The position for SDLT is different if joint owners are unmarried and not in a civil partnership when they transfer an interest in land or property from one joint owner to another. In these cases SDLT may be payable see below.

SDLT IS PAYABLE ON A TRANSFER OF EQUITY WHERE MONEY OR MONEYS WORTH IS INVOLVED AND THE AMOUNT IS ABOVE THE CURRENT SDLT THRESHOLD OF £125,000

Calculating SDLT on a Transfer of Equity for value or where a mortgage is involved can be complex but CMS or your solicitor will advise you on this.

TYPES OF TRANSFER OF EQUITY AND SDLT RULES

• Adding a name to your deeds. Stamp duty is calculated on any cash that changes hands and also, if there is a mortgage, the share of the mortgage amount that is being taken over.
• Removing a name from your deeds. Stamp duty is calculated on any cash that changes hands and also, if there is a mortgage, the share of the mortgage that is being transferred.

Even where no money is changing hands if there is a mortgage on the property and the appropriate share exceeds the current SDLT threshold of £125,000 you would be liable for SDLT.

There are other exemptions and reliefs from SDLT and full details can be found on the HMRC website.

HOW AND WHEN DO I PAY MY STAMP DUTY LAND TAX?

If you are using a solicitor to buy your property they will deal with this for you. There is a Stamp Duty Land Transaction form which must be completed and signed by you. This must be sent to HMRC together with the correct amount of SDLT within 30 days of completing your purchase.

If you are obtaining a mortgage to purchase then your solicitor has a duty of care to your lender to ensure that the SDLT form and payment are submitted to HMRC. Practically speaking, this means that your solicitor will complete the SDLT form on your behalf and send it to you for signing. They will collect the correct amount of SDLT from you before completion along with the other costs of the purchase. They will then submit the form and payment, usually online, immediately after completion.

Your CMS quote includes the cost of completion of the SDLT form and submission on your behalf to HMRC

If you are not obtaining a mortgage to buy and are not using a solicitor then you can deal with this yourself.

There is a £100 penalty for late submission plus interest.

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