Stamp Duty Land Tax: The Complete Guide (2019)
Last updated 24th July 2019 • Lois Arcari • JaeVee
In the property business, everyone talks about tax.
But how many of us really understand it?
Especially as the surrounding legislation can seem to change year after year.
Our ultimate guide will demystify the ins and outs of Stamp Duty Land Tax.
What is it?
Stamp Duty Land Tax (SDLT) is a tax that applies on every property bought in England and Northern Ireland.
You have to pay this on any residential property that costs over £125,000.
SDLT is also called ‘consideration’.
This is the additional price you pay for property or land.
This can include another type of payment such as goods, works/services, release from debt or the transfer of debit like an outstanding mortgage.
How much SDLT you pay is all dependent on the property value and if you are a first time buyer, buying a residential property or a non-residential/ mixed use property.
All of these strategies have their pro’s and con’s when it comes to tax.
Any VAT payable in respect of the transaction is known as chargeable consideration.
So, if you have bought a commercial property with VAT on the purchase price, you will effectively be paying a double tax - because you’ll also have to pay SDLT at the rate of VAT.
Did you know? You can claim relief as a first time buyer or when buying multiple properties when a transaction or number of linked transactions include freehold or leasehold interests in more than one dwelling.
A full list of potential reliefs > > HMRC’s official materials.
The threshold for the tax is currently at £125,00 for residential properties and £150,000 for non-residential properties.
The rate bands for Stamp Duty Land Tax are currently as follows;
- Property Value of £125,000 0%
- Property Value of £125,001- £250,000 2%
- Property Value £250,001- £925,001 5%
- Property Value £925,001- £1.5 Million 10%
- Property Value over £1.5 Million 12%
You’ll have to pay an extra 3% on any additional properties that cost more than £40,000, like a second home/ a buy to let.
Top tip: For a quick overview, we’d recommend using the Money Advice Service Stamp Duty Calculator.
First time buyers
First time buyers will not have to pay Stamp Duty Land Tax (provided your property was purchased on or after 22nd December 2017 and the price was up to £500,000).
If the price is over £500,000 then you will still need to pay Stamp Duty Land Tax even if this is your first property.
You will also need to pay SDLT if you:
- Buy a freehold property
- Buy a new or existing leasehold property
- Go into a shared ownership scheme
- Transfer land or property in exchange for payments.
A homeowner could be eligible for a refund on SDLT if they are a first time buyer who has paid SDLT on a shared ownership property from between November 22, 2017 and October 29, 2018.
This refund will only be payable if they were eligible for relief, but did not receive it.
If this has happened, the homeowners should write to HMRC.
They'd need to detail the amount that they have overpaid, their bank or building society name, account number and sort code.
Stamp Duty Land Tax can be reduced or could even not apply in certain situations.
If the property is only slightly over the threshold band you could try and see if the seller will accept a lower price so that you’re comfortably under the threshold.
If you are transferring a proportion of the house over in a divorce or separation case you will not have to pay SDLT.
This also applies in the transfer of deeds.
When it’s deductible
You can deduct the price of SDLT when you’re counting your capital gains.
Depending on how much SDLT you paid initially, you could save a tidy sum on your capital gains tax.
But make sure your calculations are 100% accurate!
You'll want to provide all the appropriate paperwork when asked - HMRC are becoming increasingly vigilant.
For more information, check out the top ways to legally reduce stamp duty.
How to Pay
You will have to send an SDLT return to HMRC.
Since March 2019 the allotted period for filing and paying the tax has reduced.
Gone from 30 days to only 14 days!
Normally, your solicitor, agent or conveyancer will file and pay the tax on your behalf, adding this to their fees.
You can incur penalties if you have not paid it in the specified time frame.
Whether it is the first time, or the fifth time, make sure you factor into your budget the relevant SDLT implications - this will have an impact on your budget as an additional cost, and fundamentally affect your income further down the line.
You have a more generous 12 months from your filing date to make any amendments to your return.
Your filing date is considered to be 14 days after the effective date of your transaction.
You can correct minor errors over the phone on their helpline - at the end of this article - or more substantial errors by post.
To double check if you’ll need an amendment, look here.
There are plenty of penalties to watch out for.
If you file or pay late you’ll have to pay an automatic fixed penalty.
The amounts are:
- £100 if you file your return up to 3 months after the filing date
- £200 if you file your return more than 3 months after the filing date
You’ll also have to pay interest from the first day after you should have paid your SDLT until the day that you do pay it.
If you don't pay, HMRC will write to you and your agent to tell you how much tax you’ve underpaid and how much interest you’ve been charged.
You’ll be expected to pay the SDLT, tax and interest ASAP.
And if you don’t file your return within 12 months after the filing date, you’ll have to pay a tax based penalty on top of the fixed penalty.
This can be up to the full amount of the SDLT due on your return - so you really can’t delay!
But if you’re smart enough to read this guide, we know you won’t!
How to Appeal
You have the right to appeal against any penalty you disagree with.
BUT you must appeal in writing within 30 days of receiving formal notice.
Reaching an agreement with HMRC is enough to settle most appeals, but if you can’t agree on a settlement you do have other options.
- You can contact HMRC again to ask them to review their decision.
- You could also ask an independent tribunal to consider your appeal.
You’re able to appeal against a penalty if your return was delayed because of unforeseeable events, or events beyond your control.
HMRC will only accept your excuse as reasonable if the event meant that you were unable to file the return yourself or arrange for another person to file it for you.
Events likely to be considered as a reasonable excuse include:
- Posting your SDLT in good time but having it delayed or lost in the post - because of things like extreme weather e.g. snow or flood, or if there’s been industrial action
- If your adviser had suddenly become too ill to control their business or private affairs e.g suffered a stroke
- The death of your adviser
How would you increase your chances of a successful appeal?
You should stress that you’ve done everything you could to return your SDLT file as soon as the circumstances would allow.
You can also appeal if you believe your late payment was caused by delays from HMRC.
In this case, you should write to the address we’ll provide at the bottom of our article.
You will need to explain your reasons for thinking that HMRC’s actions have caused the late payment, and enclose any supporting evidence along with your letter.
You should also write to HMRC if you do not think you should pay interest, think you’ve been charged too much, or want to request a full breakdown of interest.
If there’s anything else you need clarifying, we’d recommend that you call the official HMRC SDLT helpline on 0300 200 3510 (where the lines are open from 8.30am to 5pm) or write to: Stamp Duty Land Tax, HM Revenue and Customs, BX9 1HD, United Kingdom.
We hope that this article has helped you understand SDLT and avoid some potential pitfalls.