Stamp Duty Land Tax Rates and Reliefs

A land transaction means a transaction where the legal title to a property changes hands, such as a sale, transfer of equity or gift (remortgages where there is no transfer are liable for duty) and the amount of duty payable depends on the actual consideration (purchase price) paid, the amount due being a percentage of the consideration, between 0% – 5%.

Stamp Duty Land Tax Thresholds

Duty is charged at a different rate depending on the amount of consideration paid for the property. The table below shows what rates are payable:

£0 – £125,000 0%

>£125,000 – £250,000 1%

>£250,000 – £500,000 3%

>£500,000 4%

From 06 April 2011 a new higher rate of 5% for transactions worth over £1,000,000 will be introduced.

First Time Buyer Relief

For transactions completed between 25 March 2010 and 24 March 2012 inclusive, where the purchaser is a first time buyer and the price is £250,000 or less, the purchaser will be able to claim full relief from duty. An SDLT return will still need to be filed and an “SDLT-5″ certificate obtained.

Any individual (as opposed to a company) who has never owned a property, either alone or jointly, anywhere in the world, is a first time buyer and will qualify for relief. A person who has owned a property in the name of his company would not qualify. Note that a person who buys a property in England or Wales but was previously resident in another country and owned a property there would not qualify. A person who owned a property with a spouse or partner but as part of any divorce settlement or separation agreement did not retain any interest or any of the equity would also fail to qualify.

Where two people are buying jointly and one has never owned a property but the other has, there will be no entitlement to relief for either party.

Disadvantaged Area Relief

Certain areas of the country are designated “disadvantaged areas” for the purposes of stamp duty. In these areas full relief from duty can be claimed on transactions between £125,000 – £150,000. As with any claim for relief, an SDLT return will need to be filed.

To enable you to check if an area qualifies for relief you can use the postcode search tool on the HMRC website. Just use the search box on the home page and search “stamp duty land tax”. Beware however that this tool is not definitive since areas are split by council ward rather than postcode and the postcode search may not be accurate for properties that are on the border of a disadvantaged area. If you’re not sure, call HMRC.

Transfers of Equity

Any transfer of land which results in at least one of the original owners remaining on the title following completion is known as a transfer of equity. These types of transaction do attract duty and the consideration on which it is based is the sum of any money paid to an outgoing owner or by an incoming one and the amount of liability for any mortgage that an incoming or remaining owner takes on. The two examples below illustrate this:

Example 1: Jack and Jill marry and Jack decides to add Jill to the deeds. The property is mortgaged and so Jill must become jointly liable for the debt. Not wanting to take advantage and Jack’s good nature she also decides to pay Jack for her share. The house is worth £320,000. The outstanding mortgage is for £200,000 leaving £120,000 of equity. Jill therefore pays Jack £60,000 and takes responsibility for half of the mortgage debt (£100,000). The total consideration she has paid therefore is £160,000 meaning duty of £1600 (1%) is payable. Even if she is a first time buyer she cannot claim relief because Jack is not.

Example 2: Ben and Holly own a house together but have decided to separate. They are not married. The house is worth £200,000 and the outstanding mortgage is for £150,000, for which Ben and Holly are jointly liable, leaving equity of £50,000. Ben decides to buy Holly’s share and she agrees to sell it for £25,000 provided Ben takes sole responsibility for the mortgage, which he agrees to do. Ben therefore pays Holly £25,000 and takes on here half of the mortgage debt (£75,000) making a total consideration of £100,000. Duty is therefore “payable” at 0%. This means that although the transaction is not exempt and an SDLT return has to be filed, because the consideration is less than the £125,000 threshold no tax is due.

Transactions That are Exempt From Stamp Duty

Certain transactions are exempt from the payment of stamp duty and from the requirement to lodge an SDLT return. The most common examples are transfers where the actual consideration is less than £40,000, transfers for no consideration (such as gifts), transfers of equity as a result of divorce proceedings or the dissolution of a civil partnership, whether or not a Court Order has been made and assents. An assent is a transfer by a personal representative of a deceased to proprietor to a beneficiary under a will, in order to give effect to the deceased’s wished as stated in the will and to qualify for exemption it must be completed using for AS1 or AS2.

A transfer of equity between an unmarried couple (or a couple who are not civil partners) made as a result of a separation does not qualify for exemption and nor does a transfer by a personal representative which is not an assent (i.e. a sale).

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