In the 2012 Budget Stamp Duty Land Tax was one of the biggest headline grabbers. The Chancellor announced an increase Stamp Duty Land Tax on properties worth more than £2 million. That attracted the attention, but of more significant news was the loss of 0% SDLT on properies up to £250,000 for first-time buyers.
What is Stamp Duty Land Tax?
SDLT is a tax applied on almost every property purchase made in the UK. Unless your are a DIY conveyancer your conveyancer or conveyancing solicitor will fill in the land transaction return and transfer the amount owing in SDLT to HMRC.
When quoting to carry out your conveyancer, a conveyancer or conveyancing solicitor can easily make an estimate of how much you will owe in SDLT just by enquiring as to your budget and applying the relevant percentage which must be paid. You can also use an online SDLT calculator on the HMRC website. This can be a very useful aid when assessing how far you can stretch for a new home.
Following the 2012 Budget, the current percentages for residential properties are as follows:
|Up to £125,000||0%|
|£125,001 – £250,000||1%|
|£250,001 – £500,000||3%|
|£500,001 – £1,000,000||4%|
|£1,000,001 – £2,000,000||5%|
|£2,000,001 and above||7%|
What difference has the 2012 Budget made?
While the big news may have been the big hike on mansions, the biggest impact will be for first-time buyers. Before the Budget, because of tough market conditions where money was hard to come by and house prices still high, they did not have to pay SDLT on properties up to £250,000. That has not been done away with, so first-time buyers will need to find an extra couple of thousand pounds to give to HMRC. Not good news for a group of people already squeezed by such high rents.
For the vast, vast majority of us there is no difference to the SDLT liaibility we can expect to pay, or at least no direct differences.
The people affected are those buying very expensive properties. Overnight, the amount that someone buying, for example, a £3,000,000 home would pay in SDLT jumped from £150,000 to £210,000. It is a big rise, even for people buying properties of that kind. Overseas buyers, who regularly buy the most valuable properties on the market, will face SDLT of 15% on properties over the £2 million mark.
Around 80% of properties in the higher tax band are in London, and some agents and experts warn of a possible downturn in transactions at that level and the faltering of a trickle-down system that has kept the capital’s house prices buoyant.
How is SDLT calculated?
Unlike Income Tax, SDLT is calculated at a single percentage rate. So if your new home costs £251,000, all of that amount will be taxed at 3% rather than just the last £999. This is why you see properties valued at £249,999 or £250,000 and then usually a big jump up to £260,000.
Now that the SDLT chargeable on the most expensive homes has risen so drastically, it is likely that there will similarly be a small number of properties valued between £2,000,001 and £2,200,000. Bad news for people looking to sell.