Stamp Duty Land Tax: How much will I be required to pay?

There are many variables to take into account if you are planning to purchase a property in the near future.  Its overall condition, the location, the asking price, and dealing with an estate agency are some of the most common concerns.  However, we also need to address the possibility that you will need to pay an additional surcharge known as the Stamp Duty Land Tax (SDLT).  This is a tax levied by HMRC which will need to be paid if you meet specific qualifications.  Assuming that you are indeed subject to this tax, it only stands to reason to take a look at how much you can expect to pay.  Let’s examine several variables so get a clearer picture.

A Look at the Rates Associated with Residential Properties

First and foremost, it is important to point out that Stamp Duty Land Tax needs to be paid on any residential property valued at over £125,000 pounds.  In other words, any home valued at less than this threshold is exempt from stamp duty.  Here are the corresponding percentages as the value of the residential property increases:

  • £125,001 to £250,000: 2%
  • £250,001 to £925,000: 5%
  • £925,001 to £1.5 million: 10%>
  • Over £1.5 million: 12%

So, it is therefore clear to see that the more expensive residential properties are associated with higher tax rates.  This only makes sense, as those with more money to spend tend to be able to afford more robust tax rates.  However, what about non-residential (such as commercial) properties?  Let’s take a look at what you need to know.

Non-Residential Properties

As we mentioned earlier in this article, the cut-off for non-residential properties is £150,000 pounds.  Anything above this value will be subject to Stamp Duty Land Tax.  Here is a breakdown of the the figures as of 2020:

  • Below £150,000: 0%
  • £150,001 to £250,000: 2%
  • £250,001 and up: £5%

An example can be useful to clarify this situation.  Let’s imagine that you have recently purchased a commercial property for £320,000 pounds.  According to the rates as well as the threshold of 5%, you will be obligated to pay an additional £5,500 pounds.  Please note that this payment must be made within 14 days of the close of sale if you hope to avoid additional penalties and interest charges.

A Quick Look at Mixed-Use Leasehold Properties

It is also wise to briefly mention that mixed-use properties are likewise subject to Stamp Duty Land Tax.  However, the rates here are less variable when compared to residential locations:

  • Below £150,000: 0%
  • £150,001 to £5 million: 1%
  • Over £5 million: 2%

Note that the figures mentioned above are intended to illustrate the net present value of the rent of the associated property.

Overseas Properties

One recent development worth mentioning is that overseas buyers (those who are not currently residents of the United Kingdom) will be required to pay an additional stamp duty surcharge of 2%.  While there is a bit of debate in regards to the efficacy of this move, some believe that it will help to reduce the number of buy-to-let properties within major city centres; thereby encouraging rentals.

These are only a handful of basics to take into account when determining how much stamp duty you may be obligated to pay.  Remember that first-time buyers will often be able to receive rebates.