If you purchase a property over a certain value then tax is payable. This will need to be factored into your budget as the amount of tax can be significant so you will need to consider how much deposit you might need.
Depending on whether you are a first time buyer, how many properties you already own and what part of the UK you are in the tax has a different name and rate applied.
In England and Northern Ireland the property tax is named the Stamp Duty Land Tax (SDLT). Normally any property being purchased over £125,000 will have the tax applied. But since 8th July 2020 until 31st March 2021 there is a Stamp Duty holiday exempting properties up to £500,000. The property transaction must be completed before the end of the holiday to be eligible.
In Wales the equivalent tax is the Land Transaction Tax (LTT). This will normally apply to property purchases over £180,000. The threshold was increased temporarily since 27th July 2020 to £250,000 as long as you do not already own an additional property. This rate applies until the end of March 2021.
In Scotland the Land and Buildings Transaction Tax (LBTT) is the locally applicable tax. This will apply to any property being bought at over £145,000, rising to £175,000 if you are a first time buyer. The threshold has been increased for all home buyers to £250,00 until 31st March 2021.
There is also a 3% surcharge when buying an additional property in in England, Wales and Northern Ireland. For example buying a Buy to Let or second home. In Scotland the surcharge is 4%. This still applies during the Stamp Duty holiday in England and Northern Ireland even if the property is exempt.
Stamp duty will need to be paid when purchasing any land or property over a certain price in England or Northern Ireland.
The tax changes depending on where the property or land is located. For example in Scotland you would pay Land and Buildings Transaction Tax. In Wales since 1st April 2018 you would pay Land Transaction Tax.
The tax is applicable when:
Stamp Duty Land Tax only applies to the property being purchased. Therefore any fixtures and fittings, or chattels, that can be removed are not subject to SDLT. Therefore they can be taken off the total property price. Some examples of these are sofas, carpets, fridges, free standing wardrobes and curtains. Anything which is “attached” to the property will attract SDLT and must be included in the property price. For example light switches and light fittings are permanent fixtures and will be subject to SDLT.
If the vendor has agreed to leave you certain chattels, or fixtures and fittings, between you and the seller you can agree a reasonable price and subtract it from the final purchase price. If in any doubt remember you can seek advice from a conveyancer or tax accountant or solicitor.
You have 14 days after your property transaction has completed to file a tax return for Stamp Duty Land Tax (SDLT). This must be submitted to HMRC in addition to payment for any outstanding balance. Where you have contracted a Conveyancer or Solicitor they will usually file this on your behalf on the day of completion. If HMRC do not clear your payment with 3 months you will be fined £100.
First time buyers were exempt from SDLT on property purchases up to £250,000 before March 2012. This exemption has since been stopped and so first time buyers now need to pay Stamp duty depending on the price of the property they are purchasing.
SDLT exemptions and relief are still available in some situations. If you are eligible for an exemption it can reduce the tax you have to pay. To claim an exemption you will still need to complete an SDLT tax return event if there is no tax due.
The SDLT return can be filed by the buyer but normally if they have contracted a Conveyancing firm then they will submit it on their behalf. When acting on your behalf it will be your Solicitor’s responsibility to submit the return on time to ensure you do not receive a penalty.
HMRC accept payment for Stamp duty land tax returns by the following payment methods: