Example Hero

Research

Stamp Duty Land Tax

Chestertons

We summarise below the key changes with regard to SDLT and what the implications are for anyone either currently owning or thinking of buying UK residential property.

Nick Barnes, Head of Research

The Government has recently made a number of important announcements with regard to the taxation of residential property in the United Kingdom. We summarise below the key changes with regard to SDLT and what the implications are for anyone either currently owning or thinking of buying UK residential property.

Background

SDLT is a transaction tax which applies to acquisitions of an interest (usually a freehold or a leasehold interest) in land and property in the United Kingdom. In the Autumn Statement on 3rd December 2014, Chancellor George Osborne announced a major reform of the SDLT system as it applies to residential property. These changes came into effect on 4th December 2014. Where transactions were exchanged but not completed by 3rd December 2014, the purchaser has the choice of which SDLT regime to apply.

What is the current situation?

Under the old “slab” system tax was levied on the entire value of the property regardless of which tax band it fell within. Under the new system, tax is levied only on that proportion of the value of the property which falls within each tax band. New tax bands and tax rates have also been introduced which replace those applied under the old system, as follows:

SDLT tax bands & rates before 4th Dec 2014 
Property value SDLT
rate
up to £125,000  0%
over £125,000 to £250,000  1%
over £250,000 to £500,000  3%
over £500,000 to £1m   4%
over £1m to £2m  5%
over £2m  7%
over £2m (when purchased by
non-natural persons)
 15%
Source: HMRC
SDLT tax bands & rates from 4th Dec 2014 
Property value SDLT
rate
up to £125,000  0%
over £125,000 to £250,000  2%
over £250,000 to £925,000  5%
over £925,000 to £1.5m   10%
over £1.5m  12%
over £2m (when purchased by
non-natural persons)
 15%
Source: HMRC

The SDLT charge of 15% on interests in residential dwellings costing more than £500,000 purchased by certain non-natural persons is unchanged by the reforms in SDLT in the Autumn Statement. “Non-natural persons” include companies, partnerships including a company and collective investment schemes. There are exclusions for trustees of a settlement, property rental businesses, property developers and traders, properties made available to the public, financial institutions acquiring dwellings in the course of lending, dwellings occupied by employees and farmhouses.

What are the potential implications for you?
The Government has claimed that around 98% of people buying a residential property will pay less tax under the new system. Purchasers of residential property below £937,500 and above £1m but below £1.125m should pay less tax, whilst those buying residential property for between £937,500 and £1m and above £1.125m will in most cases pay more. If you visit our website you will find an SDLT calculator which will tell you how much tax you will pay if you type in your purchase price.

We are grateful to PWC for their assistance in putting this note together. For further information please contact:

Property valuations
John Woolley, Chestertons: +44 (0) 20 3040 8513 / john.woolley@chestertons.com
Rob Haigh, Chestertons: +44 (0) 20 3040 8235 / rob.haigh@chestertons.com
Property sales
Richard Davies, Chestertons: +44 (0) 20 3040 8244 / richard.davies@chestertons.com


The contents of this report are intended for the purpose of general information and should not be relied upon as the basis for decision taking on the part of the reader. We would strongly recommend that you speak with a qualified tax specialist who would be able to advise on specific points of detail and appropriate action. Although every effort has been made to ensure the accuracy of the information contained within this note at the time of writing, no liability is accepted by Chesterton Global for any loss or damage resulting from its use. Reproduction of this report in whole or in part is not permitted without the prior written approval of Chesterton Global. February 2015.

Oxford Street Article Details

Contributed by

Nick has more than 20 years’ experience within the property research arena.

Nick Barnes

Nick Barnes

St Magnus House

020 3040 8406