All you need to know about Stamp Duty

The holiday may be over but there still is a summer of discounts available for first time buyers looking to budget for their first home. Lesley Price FCILEx of CGM Hampshire Limited gives a breakdown on the options still available when it comes to paying Stamp Duty Land Tax

STAMP DUTY LAND TAX

SDLT is a tax charged by the Government every time a property over £40,000 in value changes hands. Traditionally, the tax falls on the buyer to pay. The amount due is based on the property value and, in the case of new leases for shared ownership properties, the rent is also considered.

The rate at which tax is payable depends on the buyer’s status and, in some cases, all or part of the value can be treated as exempt if the buyer fulfils certain criteria. The most common of this is the relief current available to first time buyers.

FIRST TIME BUYER STAMP DUTY RELIEF

Although the SDLT holiday relief has ended, the first time buyer relief is still available at present. If you are a first time buyer, you will pay £0 on the first £300,000 and 5% on the amount above £300,000 up to £500,000. If you purchase a property with someone else, eg a spouse or partner, and only one of you is a first time buyer, or your property is worth over £500,000, then SDLT will be due at the normal rates.

If you are a first time buyer, you will pay £0 on the first £300,000. If you are not a first time buyer, then there will £0 due for Stamp Duty Land Tax on the first £250,000, until 30 September 2021.

STAMP DUTY RATES FOR SHARED OWNERSHIP PROPERTIES

When you buy a new shared ownership property the tax is calculated in a different way and you have options on how to pay. This is not subject to any current end date.

You can choose to pay tax when you purchase the property at the rate it would be due if you were buying 100% of the property at full market value, or you can chose to pay SDLT on the amount you are paying for your percentage share, plus any tax owing on your annual rent amount.

Unlike freehold properties, when you are buying a new lease, the tax is calculated not only on the price you are paying (The Premium) but also on the amount of rent you are paying. With standard residential leases, the rent is usually a nominal figure of £50 to £200, so it has little impact on the tax calculation, but as the level of rent you are paying for a shared ownership property is usually a lot higher, this can have a significant impact on the amount of tax you would pay.

If the amount you are paying does not attract SDLT, you can choose to defer paying tax until you buy further percentages of the property. Currently, no additional SDLT return is due if you staircase up to 80%. If you chose to defer paying the tax at the time you purchase, then it may be due when you staircase up.

Also, the rates for shared ownership properties can be used together with the first time buyer relief above, so if your full market value is under £300,000 then you can pay on the market value, but apply the first time buyer relief to cover what you have to pay. Alternatively, you can use the tapered relief up to £250,000 before 30 September 2021.

As with any tax issue, it’s best to get specialist advice at the outset to make sure you know how much to budget for and that you are paying the right amount tailored to your individual circumstances. A solicitor who specialises in shared ownership and first time purchases will be able to confirm the best tax options for your individual circumstances.

Contact us at enquiries@c-g-m.co.uk for a free, no-obligation quotation