The history of stamp duty in the United Kingdom can be traced as far back as 1694. As you might have already suspected, this duty was used to provide an extra level of liquidity to the Crown in the form of taxes on various goods and services. Some examples included playing cards, advertisements, lottery tickets, certain medicines and insurance policies. It therefore makes sense that you will also need to pay attention to stamp duty thresholds if you are planning to purchase a property in the United Kingdom. Let’s take a look at the basics in order to get a better idea.
The Concept of Stamp Duty Land Tax
Otherwise referred to as SDLT, Stamp Duty Land Tax will need to be paid by those who purchase a property or piece of land valued over a certain amount. Please note that this is referred to as Land an Buildings Transaction Tax in Scotland and Land Transaction Tax in Wales. At the time that this article was written, you will be obliged to pay Stamp Duty Land Tax if the value of a residential property is valued over £ 125,000 pounds. In the event that that the property is commercial or industrial in nature, this limit slightly increases to £150,000 pounds.
Are There Any Relief Programs in Place?
The government appreciates that some individuals may be hard pressed to pay such a tax. This is why several stipulations are attached to this rule (depending upon the purchase in question). You may be subject to a rebate (or an exemption) if purchase price is less than £500,000 dollars and you are a first-time home buyer. However, others are obliged to pay stamp duty when:
- A freehold property is purchased
- A new or existing leasehold is bought
- A property is purchases via a shared ownership program
- A mortgage is required or a share within a property is obtained
This is why it is always important to determine the type of property as well as the stipulations of the purchase itself in order to accurately appreciate whether or not you will be subject to Stamp Duty Land Tax.
One of the criticisms of Stamp Duty Land Tax centered around the notion of the “slab system”. This framework required buyers to pay flat rate on the entire price of the property. It is obvious that such a system would preclude many buyers from making a purchase due to the added financial commitment. The system has now become more progressive in regards to how much needs to be paid (we will look at this in a subsequent article).
How and When Should Stamp Tax be Paid?
This is an important question to address in order to avoid any confusion. It is critical to note that buyers are provided with a maximum window of 14 days after the sales has been closed to settle any tax obligations. Those who delay are likely to face fines as well as additional interest, so it is best to settle this tax as soon as possible.
Paying Stamp Duty Land Tax is generally straightforward. While it is possible to file a return with HMRC, a solicitor or conveyancer will generally include this option as a portion of their contractual service obligations. The solicitor will also determine whether or not you may be entitled to any form of relief (such as if you happen to be a first-time home buyer).