Stamp duty and land transaction tax - everything you need to know

One of the key expenditures when purchasing a property is the duty (or a tax) that is essential to be paid. It is a legal requirement and cannot be quibbled or bargained in any negotiation, and is an amount that is paid to HM Revenue & Customs (HMRC).

The Stamp Duty Land Tax (SDLT) was implemented by the passing of the Finance Act of 2003. For property purchases in Wales, the Land Transaction Tax (LTT) was brought in to replace Stamp Duty in April 2018. 

The ‘stamp' is derived from a physical stamp on documents to show that monies had been received from the tax. These days, that ‘stamp' is no longer required, although a return detailing the sale of property is still necessary for HMRC to ratify.

HMRC require a tax return to be submitted for the following transactions:

• Purchase of a freehold property
• Purchase of a new or existing leasehold
• Purchase through a share ownership scheme
• Any transfer of property in exchange for other payment

In other words, wherever there is a transfer of ownership of a property, either fully owned or in part, where it forms part of a financial transaction, you will be required to submit a tax return.

The current stamp duty thresholds depend on the agreed price for the property and certain other circumstances:

• For residential properties, SDLT is payable on amounts over £250,000
• For residential properties with an agreed price of £625,000 or less, and where you are a verified first-time buyer, SDLT is payable on amounts over £425,000
• For non-residential properties, SDLT is payable on amounts over £150,000

HMRC has published their guidance on various relief schemes (e.g. first-time buyers, charities, Right to Buy properties, multiple dwellings, and so on).

HMRC have an Stamp Duty Land Tax Calculator which you can use to confirm what you will be required to pay on your property transaction.

An SDLT return must be received by HMRC within 14 calendar days of the completion date. Usually, your conveyancing solicitor will handle this transfer of tax liability as part of their conveyancing process, adding the amount to their fees. If you have any concerns or worries about stamp duty, you should raise them with your solicitor as part of agreeing to their terms when you appoint them.

If the tax isn't paid within this grace period, you, as the registered owner of the property, will be liable for any penalties that might be applied and then any interest that might accrue as a result.

For Welsh property sales, you are required to pay LTT on properties with a price over a certain threshold.

According to the Welsh Government, the LTT threshold is as follows:

• For residential properties over £225,000

• For non-residential properties over £225,000

An LTT return is a self-assessment and must be made regardless of whether the threshold is reached or not.

There are also different rules and rates that apply if you already own one or more properties. As with the English SDLT, you will be required to pay the LTT on the following transactions:

• Purchase of a freehold property
• Purchase of a new or existing leasehold
• Purchase through a share ownership scheme
• Any transfer of property in exchange for other payment

Unlike SDLT, there is no relief for first-time buyers, but there exists a list of those eligible for requesting relief, such as charities, social housing, groups and so on.

The Welsh Government also provides a postcode checker to verify that the property you intend to buy is within the Welsh boundary or not.

There is also a Land Transaction Tax calculator to assist you in confirming how much tax you will be required to pay. However, your conveyancing solicitor can provide help and guidance.

The LTT will be required to be paid within 30 calendar days of the completion date. Failure to pay within this grace period will result in liability for any penalties and accrued interest.

Worried about the all the payments that need to be made for a property purchase? Need more information on what your solicitor can do to help?

That's where Homeward Legal can really help with affordable but quality conveyancing services! 

They will start work on your planned purchase (and/or sale) as soon as you agree to the quotation and appoint them to represent you. 

Homeward Legal will also provide a quote that will not change - what you are quoted is what you pay for standard conveyancing process.

There are some unforeseen items that might arise during the purchase and/or sale, but the solicitor discusses these and their cost as they come up. 

In addition, to protect the homebuyer further, Homeward Legal operates a ‘no completion, no fee' promise, which ensures that, should the purchase or sale not go through as planned to completion status, no payment is required.

Call  to get your conveyancing quote started, or to discuss your concerns with your plans to move.

Or you can get a quick quote, using Homeward Legal's easy-to-use quote generator.