Complete Guide to Stamp Duty Land Tax (SDLT): Looking to Buy a House?
There are many costs associated with buying a house. If you’re looking to buy a new house, you need to take into account all the costs when setting a budget. Some of these include, survey costs, mortgage fees, solicitor fees, insurance, and potentially tax known as Stamp Duty Land Tax (SDLT).
In this quick guide we’ll explain what Stamp Duty Land Tax is and who needs to pay it, with emphasis on residential properties bought in England. We’ll also cover when and how to pay your Stamp Duty. For up-to-date information on SDLT please visit the Government Stamp Duty Land Tax: Overview
What is Stamp Duty Land Tax (SDLT)?
Stamp Duty Land Tax or SDLT for short is a one-off government tax paid by purchasers of land and property in England. The rate of SDLT depends on the type of property, and whether it is residential or non-residential/mixed-use. SDLT rates are also tiered and different rates apply on each portion of the property price.
You pay SDLT when you buy a freehold property, a new or existing leasehold, a shared ownership scheme, and on transferred land or property in exchange for payment (e.g. you take on a mortgage or buy a share in a house).
First-time buyers may benefit from a tax relief and surcharges apply to overseas buyers and those buying additional homes or purchasing buy-to-lets.
How much SDLT do I need to pay?
Stamp Duty is calculated based on the value of the home you’re buying at the time of purchase. For up-to-date rates please refer to the Government Residential Rates.
At the time of writing, the SDLT threshold for residential properties in England is £125,000. The following table covers the rates for purchases made from 1 October 2021:
| Purchase Price | SDLT Rate |
|---|---|
| Up to £125,000 | 0% |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
Example:
You buy a house as your main residence in March 2022 for £300,000. You pay:
0% on the first £125,000 = £0
2% on the portion from £125,001 to £250,000 = £2,500
5% on the portion from £250,001 to £925,000) = £2,500
Total SDLT due is £5,000
To find out how much tax you need to pay, you can use the Government SDLT Calculator.
SDLT for first-time buyers
If you are a First-Time Buyer looking to buy a house to live in as your main residence, you may be eligible for a discount (relief) on your SDLT payments. If you qualify as a first-time buyer, you will pay:
No tax if the purchase price is £300,000 or less;
5% SDLT on the portion from £300,001 to £500,000; and
Standard rates will apply if the purchase price is over £500,000
SDLT on second homes and buy-to-let properties
If you already own a house and are looking to buy a second home or a buy-to-let, an additional 3% will apply on top of SDLT residential rates.
There are exemptions available in certain circumstances. For example, if you’re replacing your main residence you won’t need to pay the surcharge if your current residence has been sold already. However, if you have not sold your main residence on the day you complete your new purchase, you have to pay the surcharge, but you can apply for a refund if you sell your previous main home within 3 years.
For details on second home rates and refunds, please visit the Government Website.
When and how do I pay SDLT?
As part of the house buying process, you will need to instruct a solicitor or a conveyancer. Normally your solicitor or conveyancer will deal with the Stamp Duty return and any payment that is due, however, you can pay it yourself if you wish to. Either way, it is your responsibility to ensure you pay the tax as penalties and interest may apply for late payments. You have 14 days to file a SDLT return and pay any SDLT due.
Are you looking to buy a house in Liverpool?
Lavelle Estates is a Liverpool based estate agency that can assist you in finding your perfect home.
Whether you’re a first-time home buyer, or are on the hunt for a second home or a buy-to-let, Lavelle Estates can help you through the entire buying process.
Get in touch with one of our agents today!
