Property in the UK is big news right now, with house prices hitting a record high. According to the Office for National Statistics, the average price in March 2022 was £24,000 higher than at the same point in 2021.
However, the cost of living crisis means that the housing market is likely to slow down through the rest of 2022, with increased interest rates adding to the financial woes of many.
If you’re taking your first steps on the property ladder, there’s a lot of information to take on board and learn in what feels like a very short amount of time! But one of the key things to remember is that it’s not just the price of your house you have to factor in to your costs.
If you are buying a freehold property, a new or existing leasehold, property through a shared ownership scheme, or take on a mortgage to pay for land or property, then you become liable for Stamp Duty Land Tax (SDLT).
What is Stamp Duty Land Tax?
SDLT is the property transaction tax that must be paid on any property bought for more than £125,000, but varies depending on what you are buying and your status as a buyer.
The threshold for non-residential land and properties is £150,000.
If you’re a First-time buyer, there’s a stamp duty discount which means you’ll pay either less or no tax. This is as long as anyone else you’re making the purchase with is also a first time buyer. Also, the purchase price of your property must be up to £500,000. This means that a first time buyer will pay no SDLT on the first £300,000 (£500,000 for a shared ownership property), then 5% on the difference between £300,000 and £500,000.
How much Stamp Duty Land Tax do I need to pay?
The amount of tax you pay depends on how your land or property is going to be used and whether it’s for residential or non-residential (or mixed-use).
SDLT is paid on increasing portions of the property price when you buy a residential property. The current (June 2022) rates for a single, residential property (ie it’s the only residential property you own) are:
Up to £125,000
£125,001 – £250,000
£250,001 to £925,000
£925,001 to £1.5 million
Above £1.5 million)
For non-residential (eg commercial property or any land or property that isn’t part of a dwelling’s grounds) or mixed-use (such as a flat connected to a shop or office), the current rates are:
Up to £150,000
£150,001 to £250,000
Be aware! If you’re buying a residential property there are different rates of SDLT if:
- you’re a first-time buyer (see above)
- you already own a property and you’re buying an additional property
- you’re not a resident in the UK
The HMRC website has an online calculator to help you work out how much you owe, although if you’re uncertain, you should always check to avoid unpleasant surprises!
Are there any exemptions?
In some circumstances, you don’t need to pay SDLT (or file a return). These include:
- no money or other payment has changed hands for a land or property transfer
- you have been left property in a will
- property is transferred because of divorce or dissolution of a civil partnership
- you buy a freehold property for less than £40,000
When do you pay Stamp Duty Land Tax?
Stamp duty must be paid within 14 days of the completion date, which is the date when you actually get the keys for the property.
Failure to pay the duty within this period will lead to fines and interests added to the SDLT sum.