Stamp Duty Land Tax is an amount payable to HM Revenue & Customs on the purchase of property or land in the UK. HM Treasury has recently changed how this tax is calculated.
Under the old rules, prior to 4th December 2014, stamp duty land tax was paid at a single rate on the entire property price. Now the tax is calculated on a tiered system, with the first £125,000 at 0% and each amount above this charged at the appropriate rate as set out below. For example, a property bought for £275,000 will incur stamp duty of £3,750.
An additional 3% SDLT is payable on the purchase of additional residential properties (or, in the case of a purchase by a corporate entity like one of our SPVs, all purchases including the first purchase).
However, where a purchase of 6 or more units is made we have the option of to elect SDLT for non residential and mixed use land and property rates. This typically applies to commercial property but can be adopted for residential property in certain circumstances i.e. if purchasing more than 6 units in a transaction.
So for a purchase of a 6 unit block for say £1m we can adopt either basis for calculating SDLT. This is summarised as follows:
- MDR, residential property: the average purchase price is £166,666.67 and the average SDLT is £5,833. Therefore the total SDLT is £34,998 (i.e. 6 x £5,833). The total effective rate is 3.5%.
- Alternative measure (commercial): the total purchase price is £1,000,000 and the effective SDLT rate is 3.95%. Therefore the total SDLT is £39,500.
Tables for each option are shown below:
|Purchase price of property||Tax Rate (inc 3%)|
|0 to £125,000||3%|
|£125,001 to £250,000||5%|
|£250,001 to £925,000||8%|
|£925,001 to £1,500,000||13%|
|£1,500,001 and over||15%|
|Purchase price of property||Tax Rate|
|0 to £150,000||0%|
|£150,001 to £250,000||2%|
|£250,001 to £900,000,000||5%|