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Lester Aldridge Life Matters for Lymington: stamp duty update

What's the latest on Stamp Duty?

Lester Aldridge Life Matters for Lymington: an update on Stamp Duty Land Tax otherwise known as SDLT

This month the Lester Aldridge feature article in the "Life Matters for Lymington" series is an update about Stamp Duty. Stamp Duty Land Tax otherwise known as Stamp Duty or SDLT is a tax you are required to pay if you purchase a property in England. (There is a separate tax that you have to pay on a property you purchase in Wales.)

These monthly articles are so helpful in setting out clearly what can be very complicated subjects to understand. Do take advantage of the free initial consultation which Lester Aldridge offers - it's a great opportunity to explain your individual situation and ask specific questions. 

 

 

Stamp Duty Land Tax written on a post it note

If you are moving home

As a result of the government’s announcement on 23 September 2022 the nil-rate SDLT threshold for residential properties is now £250,000, an increase from £125,000. This in essence means no SDLT is payable for the first £250,000 of the purchase price. You will be required to pay SDLT on properties costing £250,001 or more. The calculation for SDLT is as per the following:-

Up to £250,000                                                                                               Nil

The next £675,000 (the portion from £250,001 to £925,000)                        5%

The next £575,000 (the portion from £925,001 to £1.5 million)                     10%

The remaining amount (the portion above £1.5 million)                                12%

For most people moving home the threshold being increased to £250,000 will be a SDLT saving of £2,500.

First time buyers

It has been the case for a number of years that first-time buyers do not pay SDLT for properties costing £300,000 or less.

With effect from 23 September 2022 this threshold will increase to £425,000 for first-time buyers meaning many more will benefit from not paying any SDLT on their first home.

SDLT will be payable at the rate of 5% for the portion from £425,001 to £625,000. If you are a first-time buyer and the purchase price is over £625,000 you cannot claim the relief and will have to pay the standard SDLT rates. All buyers must be first-time buyers for the relief to apply, if one buyer has owned a property before then you would not qualify. You must also be buying the property to live in, not as a buy to let for example.

Additional homes

If you are purchasing a property as an additional home, meaning you already own a property and are buying another one as a holiday home or rental property for example, you will be subject to higher rate SDLT. The calculation for these rates differ to those shown above and are on the following basis:-

Up to £250,000                                                                                               3%

The next £675,000 (the portion from £250,001 to £925,000)                        8%

The next £575,000 (the portion from £925,001 to £1.5 million)                     13%

The remaining amount (the portion above £1.5 million)                                15%

You will see that there is an additional 3% charged on these purchases and this is triggered as soon as the purchase price is £40,000 or more, which in most cases a property in England will be!

There are other circumstances where you will be required to pay higher rate SDLT which include:-

  • If you are buying in your sole name but your spouse or civil partner owns another property in the UK or anywhere in the world
  • If you own another property abroad
  • If you have a beneficial interest in another property anywhere in the world and the value of your share in that property is £40,000 or more
  • If you are purchasing in a Company name rather than as an individual

If you are purchasing a property that you intend to be your main residence but you do not sell your current home at the same time or beforehand, you will be have to pay the higher rate SDLT surcharge. If you are able to sell your first main residence within 3 years of the purchase of your replacement main residence, you can obtain a refund from HMRC for the additional SDLT paid.

Non-UK residents

With effect from 1 April 2021 if you are a non-UK resident there will be a 2% surcharge added to the above tax rates when you purchase a property in England.

You are classed as a non-UK resident in relation to the transaction if you are not present in the UK for at least 183 days during the 12 months before your purchase. In a similar way to the additional property higher rate tax surcharge, you may be able to claim a refund of the 2% surcharge if you meet residency requirements within a 12-month period after completion.

Inherited property

You do not pay SDLT on properties that you inherit when someone passes away. There may be other tax due such as inheritance tax, or capital gains tax when you dispose of the property.

The inherited property will however count against you if you purchase another property.

Please note the following examples if you have inherited a property:-

  • You have never owned another property at the time you inherit the property. You decide to sell the property. You then want to purchase a property. Despite never buying a property yourself, as you have owned a property you will no longer be counted as a first-time buyer.
  • You do not own another property when you inherit the property. You keep the property and let it out. You then decide you want to purchase your own property to live in. You will have to pay higher rate on your purchase even though you intend to live there as your main residence. If you have never lived in the inherited property, you also cannot claim back the higher rate even if you sell the inherited property within the 3 years following your purchase.

As you can see from the above, the SDLT rates are very complex and the amount of SDLT due can vary dependent on many different factors. If you have any questions regarding SDLT or any other questions about buying or selling a property, please email our dedicated property solicitors This email address is being protected from spambots. You need JavaScript enabled to view it. or call us on 01202 786214.

Natasha Mallet, Lester Aldridge Solicitors

This article on the cost of social care was written by Natasha Mallett in the Lester Aldridge Property team.

About Lester Aldridge Solicitors

Lester Aldridge Solicitors are based in London, Southampton and Bournemouth - where the office covering the New Forest is situated conveniently close to the main Bournemouth train station. Their specialist teams in the various fields of law will be happy to advise and assist you, starting with a completely free initial consultation during which you can decide whether you feel able to trust them with your confidential information. Consultations are also available via virtual meetings : advice is available through phone, email, Skype and Zoom.

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Life Matters is a regular monthly feature on Lymington.com, which covers a wide range of legal subjects and is always written by one of the Lester Aldridge team.

You can see a list of all published articles by clicking to the Lester Aldridge Solicitors webpage on Lymington.com here.

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