A Guide to Stamp Duties
There are three types of Stamp Duty:
- Stamp Duty Land Tax (SDLT) – which applies to land transactions
- Stamp Duty Reserve Tax (SDRT) – which applies to sales of securities on the stock market; and
- Stamp Duty – which applies to the sale of shares and securities.
In all cases the purchaser must pay the duty based on the price paid or value if not paid in cash.
Stamp duty land tax
Stamp duty land tax is a tax on the acquisition of interests in UK land including houses, flats, other land and on both the grant and assignment of leases.
The purchaser is responsible for the payment of the tax and filing of the land transaction return, although is normally done by their solicitor on their behalf. The return should be filed within 30 days of the transaction.
SDLT is payable whether or not the parties to the transaction are based in the UK and whether or not a document is used. The consideration on which SDLT is paid is money or money’s worth and where consideration is contingent it is payable on the assumption that the contingent consideration will be payable.
SDLT is also charged on any VAT included in the transaction.
If you are buying land or property, the amount of SDLT payable is dependent upon the purchase value as shown in the following table with a higher starting point for land in designated disadvantaged areas…
From 4th December 2014, Stamp Duty Land Tax (SDLT) will be charged at each rate on the portion of the purchase price which falls within each rate band.
|0%||£0 to £125,000||Up to £150,000|
|2%||Over £125,000 – £250,000||Up to £250,000|
|5%||Over £250,000 – £925,000||Over £250,000|
|10%||Over £925,000 – £1.5 million|
|12%||Over £1.5 million|
Higher rate for corporate bodies
Residential properties bought for over £500,000 are subject to SDLT at the rate of 15% where the property is acquired by a non-natural person such as a company, partnership or collective investment scheme. For sales in the period: 22 March 2012 to 19 March 2014 the 15% rate of SDLT only applied to properties sold for £2 million or more where the buyer was a non-natural person.
Higher rates for additional properties
You’ll usually have to pay 3% on top of the normal SDLT rates if buying a new residential property means you’ll own more than one.
Grant and assignment of leases
Stamp duty land tax is applicable to both lease premiums and to the rental element of a lease.
New leasehold sales and transfers
When you buy a new residential leasehold property you pay SDLT on the purchase price of the lease (the ‘lease premium’) using the rates above.
If the total rent over the life the lease (known as the ‘net present value’) is more than £125,000, you also pay SDLT of 1% on the portion over £125,000 – unless you buy an existing (‘assigned’) lease.
When you buy a new non-residential or mixed use leasehold you pay SDLT on both the:
- purchase price of the lease (the ‘lease premium’) using the rates abolve
- value of the annual rent you pay (the ‘net present value’)
These are calculated separately then added together.
The net present value (NPV) is based on the total rent over the life of the lease. You don’t pay SDLT on the rent if the NPV is less than £150,000.
|Net present value of rent||SDLT rate|
|£0 to £150,000||Zero|
|The portion from £150,001 to £5,000,000||1%|
|The portion above £5,000,000||2%|
Stamp duty reserve tax
Stamp duty reserve tax is mainly dealt with by Stock exchange brokers and financial intermediaries.
SDRT is charged at 0.5% on the value of the consideration for the transfer. It is cancelled by the payment of Stamp Duty on the same transaction.
This only applies to the transfer of shares and securities and is levied at 0.5% of the value of the chargeable consideration, rounded up to the nearest £5, on each document to be stamped.
Where the consideration is £1,000 or less, these transactions will be exempt from stamp duty and will not need presenting for stamping.