A Beginners Guide To Stamp Duty Land Tax (SDLT)
If you’ve ever bought and/or sold property in England, or indeed been paying attention to the news for the past year, you’ve likely heard the term ‘Stamp Duty’. SDLT stands for Stamp Duty Land Tax, which is referring to the exact same thing, only correctly.
Confused? You aren’t alone.
In fairness, the various terms people use for SDLT is possibly the least confusing thing about this property tax. Charged to the buyer on the transfer of property for consideration (payment, either in cash or other formats), and based on the amount of that consideration, most people don’t even realise that SDLT is a personal, self-assessed, tax.
This means that although you may have left your solicitor to work it out for you, responsibility for the amount paid lies with you as the buyer, not the lawyer. If it’s wrong, it’s down to you to rectify it, in other words.
How is it Calculated?
SDLT is calculated these days on a ‘Slice’ system – rather than being calculated as a simple percentage of the total purchase price of the property, there are differing percentages to pay on different parts of the purchase price:
|Residential Property Purchase Price||SDLT Rate||Non-Residential Property Price||SDLT Rate|
|Up to £125,000||Zero||Up to £150,000 ||Zero|
|The next £125,000 (from £125,001 – £250,000)||2%||The next £100,000 (the portion from £150,001 to £250,000) ||2%|
|The next £675,000 (from £250,001 to £925,000)||5%||The remaining amount (portion over £250,000)||5%|
|The next £575,000 (from £925,001 – £1.5 million)||10%|
|The remaining amount (portion above £1.5 million)||12%|
In short, the more expensive the property, the higher the SDLT cost, and the more complexity is involved in working it out. And that’s just the tip of the iceberg.
The rates above apply to residential property in normal circumstances. However, the government has a habit of tinkering with SDLT quite often, for policy reasons.
And then there’s Surcharges…
You’ll likely be aware of the Higher Rate on Additional Dwellings, also known as the 3% surcharge?
If you are buying an additional residential property – say a buy to let or a holiday home – then this change, made in 2016, means you’ll be subject to a ‘surcharge’ of 3% on the purchase price, on top of any other SDLT you might normally pay.
That means – for those paying attention – that there is no 0% rate band on these purchases, as even at £125,000 or lower, you are paying 3%. You are able to reclaim this if you go on to dispose of your current main residence within a certain period of time, but that’s assuming that you were not subject to one of the exclusions at the time of purchase.
If you haven’t lived in the UK for more than 6 months in the year before purchase then you’ll also be asked to pay a further 2% Non-Resident Surcharge….. Making the top rate of SDLT 17%!
Now that’s a (49) Relief
If you bought multiple properties in the same transaction, you may have been eligible for Multiple Dwellings Relief, which can substantially reduce your SDLT bill on such purchases, but is often missed by conveyancers.
Buying a property with land or an annexe attached? Different rates may apply. Buying a commercial property? Different rates definitely apply.
Errors and Guides
In our experience, a lot of transactions go through with the wrong amount of Stamp Duty Land Tax being paid – SDLT Refunds, which specialises in recovery of overpaid Stamp Duty, has recovered over £15 million in overpaid SDLT to date.
This is partly thanks to the complexity of the rules catching many conveyancers out, and partly due to the insufficiency of the tools provided by HMRC, upon which most of them rely.
HMRC’s SDLT calculator misses many of the nuances that can lead to different results for an SDLT calculation from the norm, and HMRC themselves have gone on record as saying it is intended merely as ‘a guide’ rather than a definitive answer.
The Definitive Answer
Compass was designed to solve all of these issues, for property lawyers and their clients. Built with the input of Chartered Tax Advisers and Conveyancing solicitors.
Compass is a dedicated tool designed to assess any type of purchase and ensure the right Stamp Duty result is produced. Constantly updated to reflect the latest changes in SDLT legislation, fully insured and backed up by the personal advice of the UK’s leading experts on the subject, it’s the best way to ensure that the right Stamp Duty is paid first time, every time.
Our growing network of law firms all agree that Compass is the safest, most reliable way to calculate your Stamp Duty liability – ask your lawyer today if they’re using us, and if they aren’t, why?
Get in touch today to receive an accurate, insured and indemnified Stamp Duty Calculation: