During the Autumn Statement this afternoon, George Osborne announced changes to Stamp Duty Land Tax (SDLT). SDLT is a tax which is charged on the purchase of residential property, with the purchaser liable to the tax.
Under the old rules, stamp duty was charged on the entire property price. Under the new rules, which become effective on 4 December 2014, stamp duty will now be due on the portion of the property price falling within new tax bands.
The tax bands
The new rates are:
|Purchase price of property (£)||Rate of tax|
|Up to £125,000||Zero|
|£125,001 – £250,000||2%|
|£250,001 – £925,000||5%|
|£925,001 – £1.5m||10%|
Under the old rules, if a residential property was bought for £185,000, the purchaser would have been liable to SDLT of £1,850 (£185,000 x 1%).
Under the new rules, the purchaser is liable to SDLT of £1,200 (£125,000 x 0% + £60,000 x 2%).
Using a more expensive property as an example, if a purchaser is buying a house for £750,000, the SDLT charge is £27,500 (£125,000 x 0% + £125,000 x 2% + £500,000 x 5%).
HMRC has an online calculator to help purchasers calculate the SDLT.
Purchasers in transactions where contracts have already been exchanged, but completion is on or after 4 December 2014, can use the old or new rules.
Contracts were exchanged for the purchase of a residential property on 13 October 2014, but completion is due to take place on 12 December 2014. The purchase price of the property has been agreed at £450,000.
Under the old rules, the SDLT charge is £13,500 (£450,000 x 3%).
Under the new rules, the SDLT charge is £12,500 (£125,000 x 0% + £125,000 x 2% + £200,000 x 5%).
The purchaser can choose to pay £12,500 or £13,500.
However, if a purchase has been completed on or before 3 December 2014, the old rules apply.
If a purchase has been made ‘off plan’, the transitional rules will apply if completion has yet to take place.
How to pay stamp duty
A stamp duty return has to be submitted and the SDLT paid by the purchaser within 30 days of completing the acquisition of the property.
A return still has to be submitted even if there is no SDLT to pay, unless the property costs less than £40,000.
Most people pay a solicitor to file the return for them.
Under the changes, purchasers of residential property for £937,500 or less will pay the same or less SDLT than they would have done under the old rules. Purchasers of residential property between £1m and £1.125m will also pay less tax.
Author: Guy Smith, Tax Investigations Manager on the ReSource Tax and VAT Consultancy Team