A quick guide stamp duty
As a Service-leaver, you have various accommodation route cards you can consider, one of which may be purchasing a home. This decision will inevitably involve grappling with Stamp Duty Land Tax (SDLT), more commonly referred to as ‘stamp duty’.
By Fiona McCann
Here, we explain the finer details of SDLT and how this will impact your property purchase.
What is SDLT?
SDLT is a tax paid on property and land purchases. The amount varies based on the property’s value. Note that stamp duty rates also vary significantly across the UK. This article focuses on SDLT in England and Northern Ireland, so, for a more detailed picture of rates in Scotland and Wales, see the websites listed at the end of this article.
How much is it?
This depends on what category of buyer/owner you are, as well as the value of the property. SDLT is calculated as a percentage of the property’s purchase price, so the higher
the value, the greater the percentage of SDLT you will incur.
First time buyers
You lucky, lucky people! The Government is currently offering you a ‘special offer’ and you will not pay SDLT on properties costing less than £425,000. However, you must submit a claim form. For properties priced between £425,000 to £625,000, a 5% SDLT rate applies to the amount exceeding £425,000. Beyond £625,000 regular SDLT rates apply.
Example:
For a home costing £500,000.
No SDLT is payable on the first £450,000.
5% SDLT on the remaining £75,000, resulting in a total SDLT of £3,750.
Moving home
SDLT is not charged on the first £250,000 for home movers – result! If the cost is between £250,000 and £925,000 you will need to pay 5% on the amount over £250,000. For homes priced between £925,000 and £1.5 million, the charge is 10% on the portion over £925,000. Finally at the dizzy heights of homes costing in excess of £1.5 million you will incur a mere 12% on the portion over £1.5 million.
Example:
For a home costing £500,000.
No SDLT payable on the first £250,000.
5% SDLT paid is on the next £250,000, resulting in a total of £12,500.
Additional property owners
Buy-to-let and second homes fall into this category and incur an additional SDLT surcharge of 3% on the entire value of the property.
Example:
For a home costing £500,000.
3% SDLT paid on the first £250,000. Charge £7,500.
8% SDLT paid on the next £250,000. Charge £20.000. Resulting in a total of £27,500.
Who pays SDLT?
SDLT is applicable to most property transactions, including freehold, leasehold, shared ownership, and property transfers.
SDLT exemptions
Certain scenarios exempt owners from paying SDLT, such as property received through a will, transfers as part of a divorce settlement, property transfers as a ‘gift’ (provided they are mortgage free), and properties purchased for less than £40,000.
You may have to ‘grizz it’ for a while to save up for SDLT along with other purchase cost, but understanding SDLT should assist you in preparing for your departure, without any surprises.
Check the rates
Where you live in the UK will determine what stamp duty you pay. Check the rates via:
Scotland
www.revenue.scot/taxes/land-buildings-transaction-tax
Wales
www.gov.wales/land-transaction-tax-guide
England and Northern Ireland
www.gov.uk/stamp-duty-land-tax/residential-property-rates
About Fiona McCann
Fiona McCann Served with RLC as a Driver, touring Northern Ireland multiple times, Canada and Cyprus. She left to pursue a career in the property sector, surveying homes for mortgage lenders, and is currently studying to become a lawyer.
