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Stamp Duty Land Tax Rates and Reliefs

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By : Brazg Gavin    99 or more times read
A real estate transaction is where the legal title of the property will be transferred from one person to another, like a purchase, transfer of equity or gift (remortgages where there's no transfer are liable for duty) and the amount of duty payable depends on the particular consideration (purchase price) paid, the amount due being a percentage of the consideration, between 0% - 5%.

SDLT Thresholds:

Duty is charged at a different rate with respect to the amount of consideration covered for the property. The table below shows what rates are payable:

0 - 125k =0%

>125k - 250k =1%

>250k - 500k =3%

>500k =4%

From 06 April 2011 a new higher rate of 5% for transactions worth over 1,000,000 will be introduced.

New Purchaser Relief:

For deals concluded between 25 March 2010 and 24 March 2012 inclusive, in which the buyer is a first-time buyer and also the price is 250k or less, the purchaser can get full respite from duty. An SDLT return will still have to be submitted and an SDLT5 certificate obtained.

Anyone (compared to an organization) who may never have owned a property, both on their own or collectively, anywhere in the world, is a first-time purchaser and can qualify for relief. Somebody who has owned a property in the name of his company would not meet the criteria. Remember that someone who purchases a house in England or Wales but once was a resident in a different state and owned a property there would not be eligible. Anyone who possessed a property with a spouse or partner but included in any divorce settlement or break up agreement didn't maintain any interest or some of the equity would also fail to qualify.

Where two different people are buying collectively then one has never owned a property but the other has, there will be no entitlement to relief for either party.

Disadvantaged Area Relief:

Certain areas of the nation are selected "disadvantaged areas" for the usages of stamp duty. Over these regions entire relief from duty can be claimed on transactions between 125k - 150k. As with any claim for relief, an SDLT return must be filled out.

To assist you to see if an area qualifies for relief you need to use the postcode search tool on the HMRC website. Just use the search box within the home page and search "stamp duty land tax". Be careful nonetheless that this kind of tool is not conclusive considering that places are separated by council ward instead of postcode plus the postcode search may not be correct for properties that are on the border of a disadvantaged area. If you are not sure, contact HMRC.

Equity Transfer:

Any sale of land that leads to at least one of the original holders still left within the title following completion is called a transfer of equity. These kind of exchange do entice duty and also the consideration on which it is based is the sum of anything paid to an outbound owner or by an inbound one and the amount of liability for any mortgage loan that an inbound or staying owner assumes. Both examples below demonstrate this:

Illustration one: Jack and Jill got married and Jack makes a decision to include Jill to the deeds. The home is mortgaged and so Jill must become jointly liable for the debt. Unwilling to reap some benefits and Jack's good character she likewise chooses to cover Jack for her share. The house is valued at 320k. The remaining mortgage is for 200k leaving 120k of equity. Jill therefore gives Jack 60k and takes responsibility for 1 / 2 of the mortgage debt (100k). The total consideration she's paid consequently is 160k meaning duty of 1.6k (1%) is payable. Even though she is a very first time buyer she can not declare relief due to the fact Jack isn't.

Case 2: Ben and Holly own a residence together but decided to part ways. They are not married. The home is worth 200k, and the outstanding mortgage is actually 150k, for which Ben and Holly are jointly accountable, making equity of 50k. Ben decides to buy Holly's share and she agrees to offer it for 25k given Ben will take lone liability for the home loan, which he agrees to undertake. Ben therefore will pay Holly 25k and takes on here 50 % of the home loan debt (75k) getting a total consideration of 100k. Duty thus remains "payable" at 0%. This means that even though deal is not exempt and an SDLT return has to be filled out, for the reason that the consideration is less than the 125k threshold no tax is due.

Deals Which are Exempt From Stamp Duty

Certain deals are exempt from the payment of stamp duty as well as from the prerequisite to make an SDLT return. The most typical instances are transfers where the real consideration is less than 40k transfers for no consideration (such as gifts), transfers of equity because of divorce proceedings or the dissolution of a civil partnership, whether or not a Court ruling has been given and assents. An assent is a transfer by a personal representative of a deceased to proprietor to a beneficiary under a will, to be able to give effect to the deceased's wished as mentioned in the will and also to qualify for exemption it has to be accomplished using form AS1 or AS2.

A transfer of equity between an unmarried couple (or a couple who're not civil partners) made due to a separation doesn't receive exemption and neither does a transfer by a personal representative which is not an assent (i.e. a home sale).
Gavin Brazg is editor of The Quick House Sale Advisory - UK's largest free resource of free expert advice for property sellers.

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