Stamp Duty Land Tax: What reliefs are in place for property buyers?
SDLT has a current threshold of £125,000 for residential properties and £150,000 for non-residential land and properties. If the purchase is not for a first home, the SDLT rate is based on a tapering scale. The rates will are applied based on the value of the property and the charge could be as high as 12 percent.
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However, first time buyers can claim a relief so that no tax is paid on up to £300,000 of the property.
On top of this, any portion of the property that is between £300,001 and £500,000 is only charged with five percent.
To qualify for this relief, the purchase needs to be made on or after 22 November 2017 and the purchase price must not be higher than £500,000.
To claim this relief, the code “32” should be entered in the SDLT return.
There are also reliefs in place for first time buyers of shared ownership properties.
The qualifying rules for this are very similar to individual buyer rules. The property must be bought after 22 November 2017 and use also be valued below £500,000. On top of this, however, the buyer must intend to occupy the property as their main residence.
The relief here can also apply to rental payments, meaning that no SDLT will be due on the rental portion of the agreement.
The relief here was updated in 2018. From 29 October 2018 the relief was extended to include purchases of shared ownership property where the purchaser chooses to pay SDLT in stages.
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There is also relief in place for people who are purchasing more than one property.
Relief can be claimed when a person buys more than one dwelling, where a transaction or a number of linked transactions include freehold or leasehold interests in more than one dwelling.
This is a more complex procedure to follow and the government detail that a specific calculation should be used to work out what’s owed.
To claim relief here, the person involved will need to first work out the rate of tax that HMRC will charge.
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This involves dividing the total amount paid for the properties by the number of dwellings.
The tax due will be based on this figure. The answer generated here will need to be multiplied by the number of dwellings.
The minimum rate of tax under the relief is one percent of the amount paid for the dwellings.
All these details and calculations could be tricky to keep on top of but the government provides an SDLT manual on its website.
There are some instances where multiple dwellings relief does not apply. The relief will not apply to the transfer of a freehold reversion or headless where a dwelling has a long lease of 21 years or more.
If this is the case, the usual rates will apply without any relief. It may be possible to recalculate the tax due if the number of dwellings is reduced within three years of the transaction.
An example of where this will be applicable can include combining two apartments into one. There are also reliefs in place for building companies who buy an individual home, for employers who buy employee homes and similar circumstances.
SDLT is commonly targeted by government budgets and statements. Many will be keeping an eye on any changes made to SDLT relief in next week’s budget.
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