A Guide to Stamp Duties
There are three types of Stamp Duty:
- Stamp Duty Land Tax (SDLT) – which applies to land transactions
- Stamp Duty Reserve Tax (SDRT) – which applies to sales of securities on the stock market; and
- Stamp Duty – which applies to the sale of shares and securities.
In all cases, the purchaser must pay the duty based on the price paid or value if not paid in cash.
Stamp duty land tax
Stamp duty land tax is a tax on the acquisition of interests in UK land including houses, flats, other lands, and on both the grant and assignment of leases.
The purchaser is responsible for the payment of the tax and filing of the land transaction return, although is normally done by their solicitor on their behalf. The return should be filed within 30 days of the transaction.
SDLT is payable whether or not the parties to the transaction are based in the UK and whether or not a document is used. The consideration on which SDLT is paid is money or money’s worth and where consideration is contingent it is payable on the assumption that the contingent consideration will be payable.
SDLT is also charged on any VAT included in the transaction.
If you are buying land or property, the amount of SDLT payable is dependent upon the purchase value as shown in the following table with a higher starting point for land in designated disadvantaged areas…
|Land and Buildings in the UK|
|0||£0 to £125,000||£0 to £150,000|
|1%||£125,000+ to £250,000*||£150,000+ to £250,000|
|3%||£250,000+ to £500,000||£250,000+ to £500,000|
|4%||£500,000+ to £1,000,000||Over £500,000|
|5%||£1,000,000+ to £2,000,000|
|15%||Over £2,000,000 bought through a company|
Where a purchaser of residential property acquires an interest in more than one property, the mean consideration is used (total consideration divided by a number of properties) to determine the rate of SDLT, subject to a minimum 1% rate.
For disadvantaged areas, sales of the residential property up to £150,000 are exempt.
Zero Carbon Homes
From 1 October 2007 until 30th September 2012, all new zero-carbon homes and flats costing up to £500K are to be exempt from stamp duty land tax. Homes above this value will qualify for a discount in SDLT of £15,000. This only applies to new homes and flats which have SDLT on the first sale.
Grant and assignment of leases
Stamp duty land tax is applicable to both lease premiums and to the rental element of a lease.
The premium is treated for SDLT purposed the same as if was for a freehold. However, for non-residential properties, the nil band does not apply if the relevant rental figure for the lease is more than £1,000 per year. This has the effect to give the benefit of the zero rate band against the rent.
The rental element of the lease is valued by calculating the net present value (NPV) of the future rental payments under the lease. This can be calculated using facilities on the HMRC website at www.hmrc.gov.uk/sdlt/calculate/calculators.htm.
Grants of more than 7 years must be notified to HMRC where any chargeable consideration other than rent is more than £40,000 or where the annual rent is more than £1,000. However, those of less than 7 years need only be notified if there is a charge to tax. Assignments need to be notified even if below the threshold.
Stamp duty reserve tax
Stamp duty reserve tax is mainly dealt with by Stock exchange brokers and financial intermediaries.
SDRT is charged at 0.5% on the value of the consideration for the transfer. It is canceled by the payment of Stamp Duty on the same transaction.
This only applies to the transfer of shares and securities and is levied at 0.5%
Where the consideration is £1,000 or less, these transactions will be exempt from stamp duty and will not need presenting for stamping.
How We Can Help You
For further information on any type of stamp duty please contact us.