Category: Residential property

What is SDLT?

When buying a property (whether freehold or leasehold) or renting a property, the Buyer or Tender must pay SDLT unless an exemption applies. The thresholds for paying SDLT is over £150,000.00 for commercial properties and over £125,000.00 in the case of residential property. SDLT is payable on the premium or the aggregate rent and it is also payable on any VAT that is payable on the purchase price and/or the rent.

In the majority of cases, a return needs to be filed following completion of a transaction – this is whether or not SDLT is payable.  HMRC can charge a fine if the Tenant or the Buyer does not provide the SDLT return within the required timeframe.

Changes as of 1 March 2019: 14 day requirement

Previously, the SDLT return needed to be submitted within 30 days of completion of a transaction.  This deadline has now been shortened to 14 days.  It is very important to meet this deadline otherwise penalties are charged for filing late (similar to personal tax returns).

Consequences of filing a return late

If the SDLT return is not filed within the new 14 day deadline, the following penalties apply:

• Late filing of up to three months after the deadline – £100.00
• Late filing of more than three months after the filing deadline – £200.00
• In addition, a tax- based penalty is payable if the return is not filed within 12 months of the deadline. The maximum penalty can be the full amount of tax that is payable on the return being submitted.

At Vyman, as part of our service for dealing with the transaction on behalf of the Buyer or the Tenant, we would prepare the relevant SDLT return and notify the client at the outset of the amount of SDLT payable.  We would prepare and submit the SDLT on behalf of the Tenant/Buyer within the time required to avoid these deadlines.

Please contact one of our Team Members if you have any further queries about SDLT on acquisitions of either freehold or leasehold properties or on taking a lease and we will be pleased to assist.

With effect from 22 November this year first-time buyers of residential property will not be liable to pay stamp duty on the purchase of properties up to £300,000 and the first £300,000 of properties up to £500,000

Key points:

1. The exemption only applies to individual first-time buyers
2. The property must be residential.
3. The property must be for use as the only or main residence of the buyer
4. No duty is payable on the first £300,000.
5. 5% is payable on any remainder up to £500,000
6. The exemption applies to freehold and leasehold properties provided that the lease is for more than 21 years.

Questions and Answers

1. What happens if I have exchanged but not yet completed?
   You will benefit from the exemption.
2. What happens if I have just completed but not yet paid stamp duty?
   Unfortunately, you do not benefit. The exemption only applies to completions after 22 November this year.
3. What happens if my partner is not a first-time buyer but I am?
   Again, unfortunately, you do not benefit. Those buying in joint names must all be first time buyers.
4. What happens if my first-time purchase is over £500,000?
   You will not be eligible for any relief and must pay duty at normal rates on the full amount. A purchase over £500,000 or one “linked” to a purchase which results in the total value exceeding £500,000 will result in the payment of stamp duty on the total amount. There are special rules regarding linked transactions on which you should take professional advice.
5. What happens if I own property abroad?
   Anyone who has previously either alone or with others acquired a major interest in a dwelling anywhere in the world will not qualify for stamp duty relief.
6. I previously inherited a property can I claim relief on my proposed purchase?
   No. An interest in a dwelling includes previous acquisitions by inheritance or gift.
7. If I am in rented accommodation can I claim relief on the purchase of a buy to let property?
   No. the exemption will not apply if it is not going to be your only or main residence.
8. I am divorced and previously jointly owned the marital home. I am now buying a property in my sole name. Do I benefit?
   Unfortunately, because of your previous ownership, you do not qualify for relief.
9. My parents are buying a property and putting me on the deeds. Do I get relief?
   You will not do so if they already own property.
10. Can I claim relief if I have previously acquired property as a trustee?
    You can if you were not also a beneficiary of the trust and you meet the other conditions.
11. What about the purchase of shared ownership property?
    The exemption will only apply if you pay duty on the full market value of the property rather than a share and that market value does not exceed £500,000.
12. What is the position in Scotland and Wales?
    That is for Scotland to decide. Buyers in Wales will benefit until April next year when the Welsh government will decide.

A new relief has been introduced for First-time-buyers within England, Wales* and Northern Ireland that will raise the price at which a property becomes liable for stamp duty land tax (SDLT) to £300,000 for transactions taking effect on or after 22 November 2017.

Those claiming the relief will pay no SDLT on the first £300,000 of the consideration and 5% on any remainder up to a maximum purchase price of £500,000.

First-time buyers paying more than £500,000 will not be eligible for any relief.

*From 1 April 2018, Wales will assume responsibility for setting its own land transaction tax rates.

What is stamp duty?

This is a tax that applies to both Leasehold and Freehold properties regardless of whether you are purchasing with a mortgage or outright.

Who is likely to be affected?

Individuals purchasing a residential property for the first time within England, Wales and Northern Ireland.

Who qualifies for first time buyers’ stamp duty relief?

• You must be a first-time buyer and must have never had an interest in a property anywhere in the world whether this was purchased or inherited. If there are others that are involved in the purchase of the property with you, they must also be first time buyers.
• You must intent to live in the property that you are purchasing in that this will be your main residence.
• The price of the property that you are purchasing must be less than £500,000.00

What relief will you be entitled to as a first time buyer?

Depending on the value of the property, you will either pay a reduced rate or no stamp duty.  This will vary on the following; –

• If the value of the property is £300,000.00 or less, you will be exempt from paying any stamp duty.
• If the value of the property is between £300,000.00 and £500,000.00 stamp duty will be charged at an amount of 5%.
• If the value of the property is over £500,000.00 the relief will not apply to you.

How to work out how much stamp duty is payable?

You can use HMRC’s calculator to work out how much SDLT you will have to pay, which must be paid within 14 days of your transaction completing.

In practice, your Solicitor will likely take this payment from you and pay HMRC on your behalf.

How has stamp duty impacted first time buyers so far?

Figures published by HMRC this year have revealed that there has been a 3% increase in the first-time buyer relief claims from the previous quarter, with 78% of transactions paying no Stamp Duty Land Tax (SDLT) at all.

SDLT Higher Rate Changes

Minor changes to the operation of SDLT have also been introduced to grant relief under certain transactions falling within the higher SDLT rates.

Should you wish to discuss any of these changes, please contact our Property Team. info@vyman.co.uk or call Vyman at +44 (0) 20 8427 9080