How much Stamp Duty Land Tax (SDLT) will you pay when you buy residential property in the UK following the Budget?
Firstly the extension of the nil rate band to £250,000 for first time buyers ceased on 24 March 2012.
The current SDLT rates are:
Residential property purchased outside disadvantaged areas:
Zero charge – £0 to £125,000
1% charge – £125,001 to £250,000
3% charge – £250,001 to £500,000
4% charge – £500,001 to £1,000,000
5% charge – £1,000,001 to £2,000,000
7% charge – Over £2,000,000
15% charge – on properties over £2m held in a “corporate envelope” (see below)
The 7% and 15% charges were introduced in the Budget last month. The 7% charge applies to property purchases completed on or after 22 March 2012.
The 15% charge has been introduced to counter tax planning that aimed to avoid SDLT charges on high value residential property purchases. The planning involved purchasing through offshore companies, so-called “corporate enveloping”, in certain circumstances the new rate also catches UK companies. The 15% charge will apply from 21 March 2012. In his Budget speech George Osborne made it clear that he would close any variants of the scheme that were created in the future; if necessary the Government would introduce retrospective legislation.
Residential property purchased in a disadvantaged area
If a property you are purchasing is inside one of the 2,000 disadvantaged areas you may qualify for Disadvantaged Areas Relief. The only change to the SDLT rates listed above is to the nil rate band. If a property is located inside a disadvantaged area the nil rate band applies to property transactions up to £150,000. The 1% charge is adjusted accordingly, and applies to the band £150,001 to £250,000.
If you want to see if a property you are about to purchase qualifies for Disadvantaged Areas Relief you can use HMRC’s search tool at http://www.hmrc.gov.uk/so/dar/dar-search.htm