| Stamp Duty on Property Purchases
The main rates of stamp duty (Stamp Duty Land Tax from December 2003) on property sales remain unchanged in the 2003 budget at:
Residential Property:
| Property Value |
|
Duty Payable |
| £0 to |
60,000 |
0% |
| £60,001 to |
£250,000 |
1% |
| £250,001 to |
£500,000 |
3% |
| £500,001 |
or more |
4% |
Stamp duty on property transactions is to be replaced by a new tax in December 2003. This will known as Stamp Duty Land Tax (SDLT).
Finance Act 2003 - Inland Revenue Press Release
The duties will remain exactly the same as at present, but some of the loopholes, where owners and buyers have been able to avoid some duty by such measures as inflating the values of fixtures and fittings, will be closed.
The onus is on you, or your solicitor inform the Inland Revenue on completion of a purchase, file the proper paperwork, calculate how much SDLT is due and pay it within 30 days. Interest is payable on late payments.
The Inland Revenue will have the power to reclassify fixtures and fittings values where fraud is suspected, and heavy fines and penalties will ensue.
Current Rates are:
TABLE A: RESIDENTIAL |
Relevant consideration |
Percentage |
Not more than £60,000 |
0% |
More than £60,000 but not more than £250,000 |
1% |
More than £250,000 but not more than £500,000 |
3% |
More than £500,000 |
4% |
Commercial Property: |
|
TABLE B: NON-RESIDENTIAL OR MIXED |
Relevant consideration |
Percentage |
Not more than £150,000 |
0% |
More than £150,000 but not more than £250,000 |
1% |
More than £250,000 but not more than £500,000 |
3% |
More than £500,000 |
4% |
|
Current Rates apply to most property transactions, apart from some given special status if the property is located in what is known as a disadvantaged area or where other special reliefs apply - see Finance Act 2003
Disadvantaged Area Relief
Certain areas have been given disadvantaged status in the Chancellor's 2002 pre-budget report. The relief applies to properties in over 2000 areas in the UK and will save 1% on the purchase price of homes up to £150,000.
Commercial property purchases have also become more attractive in disadvantaged areas because the £150,000 limit has been abolished altogether.
The Flats Over Shops Conversion scheme also incorporates several tax concessions including stamp duty.
Buying in "disadvantaged" areas can be a good strategy for investor landlords. Buying on the periphery of more affluent areas can often have a "spill-over" effect, and gradual improvements over time can substantially increase the value of an investment. Thorough research is needed here.
Disadvantaged Areas
To find out if a property is in one of the Disadvantaged Areas you need to find the Post Code. The areas are listed on the Inland Revenue site in pdf files.
Stamp Duty on Long Leases
See the Inland Revenue information
Stamp Duty on Lettings
This is a tax on documents administered through Inland Revenue Stamp Offices of which there are several throughout the UK.
As far as residential short-lettings is concerned this has generally been a voluntary tax. Technically, an unstamped document is inadmissible in a court of law but judges have usually been sympathetic to landlords and tenants producing unstamped documents as evidence in disputes.
However, there is no saying that this will continue and in fact there is an indication that courts may not accept unstamped documents in the future. The Inland Revenue will also charge penalties for these unstamped documents.
The good news for most landlords is that the threshold for stamp duty on residential lettings is an annual rent of £5,000.
If the annual rental is below £5,000 then no duty is now payable.
Tenancies in excess of £5,000 pa attract stamp duty liabilities on the agreements - both tenant's and landlord's copies for which there will be a fixed £5 duty.
Failure to pay these duties within 30 days will result in penalty charges becoming due.
See Inland Revenue Stamp Duty Rates for full details |
