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Stamp duty

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Stamp duty land tax (SDLT) is payable on property and land purchases above set SDLT thresholds. The buyer pays stamp duty, which usually applies to both freehold and leasehold transactions.

Because SDLT can significantly increase purchase costs, it may be worth investigating any stamp duty planning opportunities when considering a property purchase. There is no longer a stamp duty exemption for first-time buyers.

Stamp duty land tax basics

SDLT may be payable on purchases and other transfers of property or land. Most property transactions must be reported to HM Revenue & Customs (HMRC) even if SDLT is not payable.

SDLT for both commercial and residential property is charged on the purchase price. It is calculated on the proportion of a property's value in each tax band. SDLT is not payable on the price of commercial properties up to £150,000 and up to £125,000 for residential properties. Amounts paid over the initial stamp duty-free bands are calculated on the amount of purchase price falling within each tax band.

For example, if a commercial property was purchased for £185,000, there would be nothing to pay on the first £150,000 and 2% SDLT would be payable on the remaining £35,000.

The way SDLT is paid has not changed.

You can use the Stamp Duty Land Tax Calculator on the GOV.UK website to work out how much SDLT is payable under the new SDLT regime.

Freehold Non-residential (Commercial property) Stamp Duty Land Tax rates

Purchase price (non-residential or mixed use)

SDLT rate paid on the property amount within each tax band

Up to £150,000

0%

Between £150,001 and £250,000

2%

Over £250,000

5%

Leasehold Non-residential (Commercial property) Stamp Duty Land Tax rates

When you buy a leasehold property, you pay SDLT on both the lease purchase price and on the value of any annual rent payable. In addition to the rates in the table above, you will also have to pay SDLT calculated using the rates below.

If you buy an existing 'assigned' lease, you are only liable to SDLT on the lease price using the rates below.

Value of rent (non-residential or mixed use)

SDLT rate paid on the property amount within each tax band

Up to £150,000

0%

Portion between £150,001 and £5,000,000

1%

The portion over £5,000,000

2%

Residential Stamp Duty Land Tax rates

Purchase price/lease premium or transfer value

SDLT rate paid on the property amount within each tax band

Up to £125,000

0%

Between £125,001 - £250,000

2%

Between £250,001 - £925,000

5%

Between £925,001 - £1.5 million

10%

Over £1,500,001

12%

There are higher rates of SDLT which apply where a person is purchasing an additional residential property or 'second home' - such as a holiday home or buy-to-let investment. The rate of SDLT will be three percentage points above the rates for residential properties listed above.

For example, if a second residential property was purchased as a holiday cottage which cost £240,000, SDLT of 3% would be charged on the purchase price up to £125,000 and 5% SDLT would be payable on the remaining £115,000 of the purchase price.

Stamp duty land tax planning

Stamp duty land tax is based on the purchase price of the land and property. Separating out anything else included in a transaction - such as machinery, furniture or carpets - will reduce the taxable price on which SDLT is payable. If this reduction means the price falls into a lower SDLT band, the SDLT payable will also be charged at a lower percentage.

At the same time, you may want to use the opportunity to identify which items will qualify for capital allowances to be set against income tax or corporation tax.

It may be possible to reduce or eliminate SDLT on larger transactions, using complex SDLT mitigation schemes. You should take specialist advice, because HMRC may look to challenge any reduction in the SDLT paid.

You can find more detailed information on SDLT on the GOV.UK website.

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