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SDLT is the tax paid on property purchase in UK by any person. The rates of SDLT change with the property price and the purpose, whether it is commercial or residential. However, there are some misconceptions about SDLT.
This article clears up these misconceptions while covering some of the common queries that the IBISS & CO team often receive regarding its terms and payment.
Misconceptions About SDLT
1) SDLT on Transfer of property between civil partners or spouses
While there are tax reliefs offered in capital gains after sale of property, a transfer of property between spouses or civil partners has no exemptions or reliefs. Therefore, if a property is gifted by a spouse or civil partner, no SDLT is applied, unless the property is mortgaged. In case the property is mortgaged and the debt is assumed by the transferee spouse or civil partner, it becomes a chargeable concern, over which, SDLT will be applicable.
2) Stamp Duty Land Tax on Additional dwellings
If the property being transferred is an additional dwelling, they are not subjected to higher rates. An additional tax 3% of will not be charged on it. In case there is any liability involved, it will remain the same at the ongoing rate.
However if you own two or more dwellings, you will have to pay higher rates for additional dwellings. If you do not already own any property and purchase a buy to let property. You will not have to pay the high rate. An additional SDLT of 3% will be applied on any purchase that follows this even if it is for residential purposes.
3) Timing Your Property Purchase and Its Impact on SDLT
When the time of purchase of an additional property is paired with the sale of your main residence, it can have an impact on SDLT. E.g. If you plan to purchase additional property, you will have to pay a higher rate of SDLT. But when this is paired with the replacement of your residence, the tax exemption due to replacement will set off against the higher rate of purchasing additional property. This way you will end up pay less.
4) Linked Transactions and Their Impact on SDLT
When two or more transactions are linked, they can increase the overall SDLT. This is because these transactions are combined and are treated as a single transaction, and only benefit from one 0% band. However in some cases, these linked transactions can reduce the tax liability. This is the case when you purchase more than one dwellings and can avail multiple dwellings relief. Also, if the transactions are of both residential and commercial nature, e.g. you are buying both residential and commercial property you will be taxed on non residential rates.
5) SDLT Reliefs for Annexes and Additional Dwellings
SDLT here can be reduced as part of a multiple dwellings relief. According to the granny annexaw, a band of more than 0% can be utilised upon purchase of multiple dwellings. This is only possible where the cost of annex or annexes is less than one third of the overall cost of property. This way, claims of multiple dwellings can reduce the overall liability and result in a lower SDLT.
In case the cost of annex or annexes is more than one third of the cost of property, each annex will be a separate dwelling and will be subjected to a 3% SDLT.
6) SDLT on Property Transfers from Partnerships to Connected Companies
In such cases, there are no specific reliefs. The tax liability due to such transactions is calculated through a formula. The result of calculation through such transfers is usually £nil. If the result is Nil, the transaction can enjoy an exemption of SDLT. This exemption is not specific to partnerships, but is general and is applicable to all transactions.
7) Difference Between SDLT & Capital Gains Tax on Property Shares
Unlike capital gains tax on property, SDLT on shares in property companies doesn’t consider the company’s property-rich status. However, stamp duty may apply, typically at a flat rate.
8) Stamp Duty on Enveloped Dwellings and De grouping Transactions
Stamp duty may be limited to tax on enveloped dwellings and de-grouping events, rather than the broader application SDLT has on direct property transfers.
SDLT is separate from ATED, which applies to high-value properties owned by companies, and de-grouping charges are more closely related to general Stamp Duty.
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IBISS & CO Today
Confused or concerned about Stamp Duty Land Tax (SDLT) on any property transaction? Book an initial consultation with IBISS & CO today. Our experienced team of specialist tax advisers and accountants will be happy to discuss ways in which to ensure that you pay an accurate amount of SDLT by claiming all possible reliefs.
