What is Stamp Duty Land Tax?

25th July 2023·Industry News

Stamp Duty Land Tax (SDLT) is a key component of residential conveyancing that can significantly impact the overall cost of buying a home due to ongoing inflation across the UK. This payment forms part of a government tax that homebuyers across every region must pay when purchasing a property, this includes residential and commercial. 

Today, we will delve into the details of SDLT, including how it is calculated, who is responsible for paying it, and any exemptions available to you when you use a trusted legal service like ours. By understanding SDLT and its many factions, homebuyers can better prepare themselves financially and navigate the busy property market more effectively.

What is Stamp Duty Land Tax?

Stamp Duty Land Tax, is a tax imposed by the UK government on the purchase of residential properties above a specific price threshold and the percentage of this increases depending on the cost of the home. This tax applies to freehold, leasehold, and shared-ownership properties. 

Depending on the purchase price of the property and the conditions related to the mortgage payments, the SDLT must be calculated and paid to HM Revenue & Customs (HMRC) within a specified time limit.

How is Stamp Duty Land Tax calculated?

The calculation of Stamp Duty Land Tax depends on the purchase price of the property and the applicable rates at the time of purchase.

These rates are structured into categories and reflect parliamentary decisions on the housing market and the overall growth of the UK. The price of the property and, typically, the location of these homes and whether the purchaser has a second property can affect where they fall in the rate bands. 

Each housing price band is divided into different tax percentages. Typically, the SDLT rates* in England are:

  • 0% for properties up to £125,000
  • 2% for properties between £125,001 and £250,000
  • 5% for properties between £250,001 and £925,000
  • 10% for properties between £925,001 and £1.5 million
  • 12% for properties above £1.5 million

*These rates may vary and can increase by more than 3% if the property purchased is an additional dwelling

Who is responsible for paying Stamp Duty Land Tax? 

The buyer is typically responsible for paying this tax and working with a conveyancing advisor means they can support you in this regard as they can pay fees on your behalf.

Reminder: When purchasing a property, buyers must pay within 14 days of completion to avoid penalties and interest charges.

Changes, updates, and exemptions

The government periodically reviews and updates the SDLT regulations, which may result in changes to the rates and categories. First-time homeowners, individuals who have purchased property before, and non-UK nationals will have different exemptions and allowances when it comes to Stamp Duty Land Tax which will need to be calculated.

In response to ongoing economic issues and stagnation in the housing market, as of 2023, the government increased the threshold for homebuyers to relieve some of the pressure of purchasing a home. These rates are as followed*:

  • 0% for properties up to £250,000
  • 5% for properties between £250,001 to £925,000
  • 10% for properties between £925,001 to £1.5 million
  • 12% for properties above £1.5 million
*Rates for first-time buyers as of June 2023

While these changes are still passing through parliament, the overall scheme is to remain in place until March 2025 to allow more potential homeowners to get themselves on the property ladder across the UK.

Legal services and advice 

Stamp Duty Land Tax (SDLT) is an important consideration in residential conveyancing – this means obtaining legal assistance is necessary. Consulting with a professional conveyancer is highly recommended for those who are entering the market for the first time and feel uncertain about the specific steps that are taken to secure a property.

Whether you’re a first-time buyer or have purchased a property before, getting legal advice and support can make the process a whole lot simpler. Here at ICS Law, we offer residential conveyancing services that cover every step of the property transaction, including calculating and paying Stamp Duty Land Tax on your behalf.

If you require residential conveyancing advice and services, get in touch.

What is Stamp Duty Land Tax?

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