Stamp Duty Land Tax in respect of residential properties

Stamp Duty Land Tax in respect of residential properties
December 4, 2014 rlkadmin

In the Chancellor’s Autumn Statement it was confirmed that as of midnight on the 4th December 2014 the Stamp Duty Land Tax (“SDLT”) regime in respect of residential properties will change. The changes do not affect the SDLT regime in respect of commercial properties, and this will remain as before.

Under the old regime tax was calculated at a single rate based upon the entire purchase price being paid. Under the new regime, tax will be payable at the following rates on each part of the price paid by you for your property:

  • On the first £125,000 of the purchase price, tax is paid at a rate of 0% (i.e. no SDLT is payable upon the first £125,000 of the purchase price and if your purchase is £125,000 or less, no SDLT will be payable).
  • On any amount of the purchase price between £125,001 and £250,000, SDLT is payable at a rate of 2%.
  • On any amount of the purchase price between £250,001 and £950,000, SDLT is payable at a rate of 5%.
  • On any amount of the purchase price between £950,001 and £1,500,000, SDLT is payable at a rate of 10%.
  • On any amount of the purchase price between £1,500,001 and over, SDLT is payable at a rate of 12%.

As an example, a house purchase at £275,000 will attract a SDLT liability of £3,750 (as opposed to £8,250 under the old SDLT regime) calculated as follows:

  1. First £125,000 of the £275,000 at 0% (therefore £nil); plus
  2. Tax at a rate of 2% for the next £125,000.00 of the £275,000.00 (£2,500); plus
  3. Tax at a rate of 5% for the remaining £25,000.00 of the £275,000.00 (£1,250)
  4. Total tax payable = £3,750

Please note that if you have already committed to exchange of contracts before the new regime takes effect on 4 December 2014 but completion will take place after 4 December 2014, you can elect whether to pay tax under the old or new regimes. If completion has taken place before 4 December 2014 you will have to pay tax at a rate prescribed under the old regime.

SDLT still presents a considerable outlay on a purchase of a property and it is always advisable to ascertain at the onset how much tax you will be required to pay. If you are unsure as to the amount of SDLT that you will be required to pay in respect of your purchase, please contact our Property Department on 0121 450 7800 and we shall be pleased to assist.