ALL THESE QUESTIONS AND ANSWERS APPLY TO RESIDENTIAL PROPERTY TRANSACTIONS. WE DO NOT DEAL WITH COMMERCIAL TRANSACTIONS.
HMRC give excellent guidance.
Frequently Asked SDLT Questions
What is Stamp Duty Land Tax?
This is a tax which is payable to the HMRC. The tax is dealt with after the conveyancing is completed. We deal with this for you and all the work is included within our fees – we will not charge you extra for doing this.
How much SDLT will I have to Pay?
If you are not a First Time Buyer and you are not buying a second home then the SDLT payable is as follows:
Under £125,000.00 0% of the purchase price
More than £125,000.00 and up to £250,000.00 2% of the amount over £125,000.00
Over £250,000.00 and under £925,000.00 5% of the amount over £250,000.00 plus 2% of the amount over £125,000.00
Between £925,000.00 & £1,500,000.00 10%
Over £1,000.000.00 12%
First Time Buyer Relief from SDLT
If I am a First Time Buyer what rates do I pay?
If all buyers of the properties are First Time Buyers then First Time Buyer Relief applies. This means that no SDLT is payable up to £300,000.
Between £300,000 and £500,000 the rate payable is 5% on all sums over £300,000
If the property is being bought for over £500,000 then this relief does not apply.
What are the conditions for First Time Buyers Relief?
The main conditions are as follows.
Any buyer must not have owned a residential property before in the UK or anywhere else in the world. If the buyer or both if more than one has owned a property before then the relief will not apply.
The property must either be used as a main residence or there must be a clear intention to do so. This means that Buy To Let properties are excluded from this relief.
No third party should have an ownership in the property. Therefore if parents have contributed they should not have ownership via a Deed of Trust.
I inherited a property but disposed of it. Am I First Time Buyer?
Becuase you owned this property you are not a First Time Buyer.
My wife owned a property before but I have not. If I buy in my sole name do I get First Time Buyers Relief?
The answer is that would get First Time Buyers Relief subject to all other conditions being compliant with.
Further to the above question if I bought the property in my own name to obtain First Time Buyers Relief and then transferred it to my wife would I avoid SDLT?
The first thing to say is that the transfer to your wife might, in any event, attract SDLT. However more to the point, HMRC will be highly critical of this arrangement. The two transactions can be regarded as linked and then SDLT will then be imposed that way. HMRC might actually regard this arrangement as illegal which would be extremely serious.
Second Home Charge SDLT Questions and Answers
What is the Second Home Charge?
The Second Home Charge is additional SDLT if the property being purchased is regarded as a second home.
What is the rate for the Second Home Charge?
The rate for the Second Home Charge is 3% of the total amount payable for the property if it applies.
Does it apply to Second Homes purchased regardless of the price being paid?
It only applies to properties which are being bought for over £40,000
If I buy my first property and it is a Buy To Let does the Second Home Charge apply?
No it does not apply. The charge only applies to Second Homes so long as you are buying it as an individual owner or owners. If you buy as Limited Company different rules apply.
If I buy through a Limited Company does the Second Home Charge apply?
Yes it does apply. It applies on all properties bought through a limited company including the first property. This means that you will pay SDLT at standard rates as set out above eg 2% and 5% and then 3% in addition. Special rules apply if you are buying in excess of £500,000 through a limited company.
Can an existing property of any value mean that a Second Home Charge would be payable on the purchase?
The property must have a gross value of £40,000. That means that mortgages on the property are disregarded. However, it is only the individual interest in that property which is counted. To take an example if a property is worth £70,000 in joint names an individual ownership would be £35,000 only assuming equal shares. If that individual purchased another property then that means a Second Home Charge would not apply on the new property because the interest is less than £40,000.
The rules state both that the existing property should be worth a gross value of £40,000 or over and that the new property should have a gross value of £40,000 or over then Second Home Charge is to apply. There is an important distinction made between the two. With regard to the existing property, it is the individual’s ownership which is important. In other words, if the individual is a half owner of a property worth £70,000 then that interest would not be relevant since it is below the £40,000 threshold. On the new property so long as the individual has an interest of any value however insignificant then the Second Home Charge applies.
I am buying a property. I do not have an existing property but my Married Partner does. Do I have to pay the Second Home Charge?
You may well be liable. The basic principle is that your married partner’s property counts as yours. This will need further investigation.
I am buying a property and in a Civil Partnership. My partner owns a property but I do not. Would I be liable for the Second Home Charge?
You may be liable exactly as the answer to the previous question. As above your partner’s property counts as yours for these purposes. Further advice should be obtained.
I am buying a property and cohabiting. I do not own a property but my cohabitee does. Does that property count for the purposes of the Second Home Charge?
No, this property is not relevant for the Second Home Charge.
If I buy a main residence (property to live in) and sell a main residence (property that I have lived in) am I liable for the Second Home Charge? I have no other property.
No, in these circumstances the main residence bought is your only property and therefore the Second Home Charge does not apply.
Does the answer to the above question alter if I have Buy to Let properties?
No. The position does not alter. You have an exemption from the Second Home Charge on the purchase because you are selling your main residence.
I am buying a main residence and have sold a main residence in the past. Will I be liable for the Second Home Charge?
Subject to compliance with HMRC regulations then you may be exempt from the Second Home Charge.
I am buying a main residence and retaining my existing main residence. I will, however, sell it in the future. What is the position with regard to the Second Home Charge?
It is payable when you buy the property. You may be able to obtain a rebate in the future but this depends on compliance with HMRC regulations.
I am buying a Main Residence and have a Buy to Let property. I do not at the moment have a Main Residence. Do I pay Second Home Charge?
In these circumstances, you would pay the Second Home Charge on the property that you are buying. In these circumstances, you would only get relief from the Second Homes Charge when buying a Main Residence if you are selling or have sold your Main Residence.
I own a Main Residence and wish to buy a Buy to Let. Do I pay the Second Home Charge on the Buy to Let property?
In these circumstances you pay the Second Home Charge.
I am buying a property for my Adult Daughter. I am gifting her the money. She has no other property. I own my own property. Do either of pay the Second Home Charge?
In these circumstances, neither of you pay the Second Home Charge. Your daughter does not own another property and is therefore not liable. You have not created an interest in the property and you are not liable either.
In the above situation is my daughter entitled to First Time Buyers Relief. (No SDLT for the first £300,000)
Your daughter would be entitled to First Time buyers Relief so long as she satisfied the other conditions. That is she has no other property before. The property being bought is worth £500,000 or less. She is using it as a main residence or intends to do so.
In the above situation, I am planning to have an interest in a Deed of Trust. Would the Second Home Charge apply and would my daughter get First Time Buyers Relief?
In those circumstances this would be classed as a Second Home for you and First Time Buyers Relief would not apply to your daughter.
I own my Main Residence in which I live. I am planning to buy a Buy to Let property which is a flat and a shop below. Do I pay the 3% Second Home Charge on this?
Since the property is part commercial you do not pay 3% Second Home Charge.
I have a residential property and I am buying land for building on. This will be a second property. Do I pay the Second Home Charge?
Land as such does not attract the Second Home Charge. However, if it has been prepared in any way for building on then the Second Home Charge applies. It is a question of fact as to whether such preparation has taken place. Laying of pipes or digging of foundations would probably mean that the Second Home Charge applies.
I have a residential property in Italy worth over £40,000. I am planning to buy a property to live in here. Do I pay the Second Home Charge on this property?
Yes. Property owned anywhere in the world, not just the U.K. counts when assessing the Charge. If the property in Italy is or has been a main residence then you may be able to get a rebate subject to HMRC rules when you sell. If it was not a main residence at any time then you would not be able to obtain a rebate if sold.
Property Inheritance and Second Home Charge
I have acquired a property by Inheritance. I did so 4 years ago. I still have this property. It is not though my main residence. I am buying another property. Do I have to pay Second Home Charge?
If you have inherited a property more than 3 years before the Purchase of a Second Home then the ownership of that property will mean that you pay the Second Home Charge on the property that you are buying. That is subject to the fact that your interest must be worth £40000 or more. So if you inherited a part only and that part was less than £40000 then that interest would not count. You would not pay Second Home Charge.
Is the position different if I inherited a property within the last 3 years and I still own it?
It could be. If you inherit and you and any spouse/civil partner own 50% or less then the interest in that property does not count. You do not have to pay Second Home Charge on the property that you are buying. If you and your spouse/civil partner own more than 50% then you pay Second Home Charge. This is subject to such interest being worth £40000 or more.
Shared Ownership SDLT
I am a First Time Buyer who is buying a Shared Ownership from a Housing Association. I am buying 50% for £150000. What advice would you give in respect of SDLT?
As a First Time Buyer you are entitled to First Time Buyer Relief up to £300000. You have to satisfy all conditions to be so classed. You should elect to be assessed for SDLT on Market Value eg the full £300000. That means that you will not have to pay SDLT at any point in the future should you Staircase up to any amount.
Does the situation alter at all if I am not a First Time Buyer because I owned a property before? Would you give different advice?
Yes the advice would be different. You have a choice. You can elect to pay on premium eg £150000. That is SDLT due of £500 at current rates. Or you can be assessed on Market Value. At current rates on £300000 you will pay £5000. That is a large payment and you will probably not wish to pay that. The attraction is though that you do not have to pay when Staircasing up. We would not though advise this generally.
SDLT on Staircasing
I am Staircasing between 50% and 70%. I know that when I took the Lease on as a new Lease at 50% I elected to pay SDLT on premium only. I understand that I may be liable for SDLT on this Staircasing. What advise would you give to me?
You will not pay SDLT at this point. SDLT is only payable when you pay in excess of 80% if you elected to pay premium only at the outset. However if you do Staircase to in excess of 80% later then you are liable to pay SDLT on this Staircasing. The amount is assessed under the Linked Transaction Regime of which see below.
I have Staircased to 50% to 70% as indicated above. I now wish to Staircase to 100%. I will then have made three payments. That is the original purchase of 50%. Then 50% to 70% the second payment and then this final payment. How is the SDLT payment dealt with?
You are liable now on the third payment. You are also liable on the second payment now. You may be liable for the first payment. That depends on the date that the Lease was first acquired. The second and third payment are payable under the Linked Transaction regime. See below.
In the above example can you explain when I pay on the first initial payment for the Lease.
This depends on the date of the original Purchase of the Shared Ownership. If bought on or after the 12 March 2008 then that payment is disregarded for SDLT purposes. If bought before that date then you will pay 1% on that payment at this point.
Can you explain the Linked Transaction regime and how this works?
You combine all three payments in the example given and you then work out the SDLT on those payments Step 1. For the third payment you then take the proportion of that payment to the total as a percentage. Step 2. You then multiply the SDLT found at Step 1 by that percentage. That is the SDLT due to that payment. Then do the same for the second payment. You then pay SDLT on the second and third payments. You could pay SDLT in the first payment if you report before the 12th March 2008.
If I buy an existing Shared Ownership say 50% what do I pay by way of SDLT.
You are assessed at normal rates SDLT rates on your purchase. So if you are a First Time Buyer you are not likely to pay anything with First Time Buyer Relief which gives an exemption on all amounts up to £300,000.
Transfers of Equity and SDLT Liability
Are Transfers of Equity subject to SDLT?
Yes they can be. It all depends on the circumstances.
My jointly owned property with my husband is being transferred to me under a court order. Are there any circumstances that SDLT would be paid?
If a property is being transferred subject to a court order then in no circumstances would SDLT be payable. The same applies if it is transferred to a separation.
Do those rules apply if the parties have been in a Civil Partnership?
The position is exactly the same if a Civil Partnership ends.
If I am married/in a Civil Partnership and separate before a Transfer of Equity takes place then would SDLT be payable in any circumstances?
If it was clear that the separation was permanent then SDLT would not be payable in any circumstances.
I was cohabiting and there was a Transfer of Equity Could SDLT be payable?
It could be. There is no automatic relief from SDLT in these circumstances.
How is SDLT calculated on Transfers of Equity?
It is calculated on two amounts of money. The first amount of money is the amount if any actually paid for the transfer. The second sum of money is then the debt or mortgage relieved by the transaction if any. The SDLT is calculated on the combination of those two sums.
Can you explain how the debt relief element is calculated with regard to SDLT on Transfers of Equity?
It only applies if there is a Mortgage. We will take a case where the property is owned jointly and in equal shares. The Mortgage is £100000. One party is buying the other out for £60000. Since each party is taken to owe one half the Mortgage then on Transfer the debt relieved is £50000. The two sums £50000 and £60000 are added together for the purpose of SDLT calculation. That sum is below the £125000 threshold and therefore SDLT on normal rates will not apply. Second Home Charge (see more below) could apply.
If the ownership of a property is transferred from joint ownership into single ownership but the mortgage remains in joint names is there a relief of debt for SDLT purposes?
No there is no debt relief. The person having transferred his/her ownership to the other is still liable under the Mortgage. This could be the case where there was a Transfer of the equitable interest by Deed of Trust, the Legal Ownership being in joint names.
In a situation where a property formerly in sole ownership moves to joint ownership what are the SDLT implications?
It is unlikely in these circumstances that a payment is being made. Therefore it is the Mortgage or debt relief that becomes important. To take an example a person may own a property with a Mortgage of £200000 and wish to take another person husband/ wife? as joint owner. In that case the original owner has the debt relieved as to one half, eg £100000. That is below the £125000 threshold and so SDLT will not be payable. The Second Home Charge might apply though. See Below.
In the above example of Transfer from two persons to one you have referred to the property as being in equal shares. Would the debt (mortgage) relief issue be affected if the property had not been owned in equal shares before transfer?
Yes it could affect SDLT. Prior to Transfer the proportion of debt owed by each is in proportion to the ownership. If therefore there was a Mortgage of £200000 and an ownership of 60% remaining party, 40% outgoing party the outgoing party would be deemed to owe £80000. On Transfer that would be a debt relieved. The remaining party would not have to pay SDLT as that is below the threshold of £125000. However, the Second Home Charge might apply.
Throughout these Questions and Answers, you have referred to the Second Home Charge. How does this apply to Transfers of Equity?
It applies in the same way as it would normally. If the person acquiring a property under a Transfer of Equity has another property then it is likely that the Second Home Charge may apply. It depends on the status and value of that other property. On the property that is the subject of the Transfer of Equity the amount paid and/or debt relief should be £40000 or NMNF. Please also note that if the acquiring persons married partner or Civil Partner has a property that can be relevant so long as the aquirring person is not divocrincing or separating from the married/ Civil Partner.
If the parties are divorcing or separating does the Second Home Charge apply?
No it does not. In those circumstances, no SDLT of any description applies. This applies in the case both or marriage and a Civil Partnership.
Repayment of SDLT if you are selling previous Main Residence
If you buy a main residence but keep your existing main residence then you have to pay higher rate SDLT at 3% on the property that you are purchasing. You will be entitled to a rebate on this payment if you sell the existing main residence within three years of the purchase of the first. You must apply for a rebate within 12 months of that sale or the filing of the tax return on the purchase whichever is later. For further details, please go to https://www.gov.uk/government/publications/stamp-duty-land-tax-apply-for-a-repayment-of-the-higher-rates-for-additional-properties