HMRC SDLT: SDLT Relief Rates: 0% on £425k, 5% on £
SDLT Rates with Relief for First-Time Buyers
When relief is available, first-time buyers benefit from reduced Stamp Duty Land Tax (SDLT) rates on their property purchases. The current rates apply to purchases made after 22 September 2022, offering significant savings on properties up to £625,000. Prior to this date, different rates applied. Understanding these rates can help first-time buyers calculate their potential tax liability accurately.
- 0% SDLT is charged on the first £425,000 of the purchase price.
- 5% SDLT is charged on the amount above £425,000 up to £625,000.
- For a £600,000 property, the SDLT would be £8,750.
- Between 22 November 2017 and 22 September 2022, the 0% rate applied to the first £300,000.
- During that period, 5% was charged on amounts above £300,000 up to £500,000.
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Read the original guidance here:
HMRC SDLT: SDLT Relief Rates: 0% on £425k, 5% on £
SDLT Rates and Relief for First-Time Buyers
Understanding SDLT
Stamp Duty Land Tax (SDLT) is a tax paid on the purchase of property in England and Northern Ireland. Knowing the rates that apply, especially when relief is available for first-time buyers, is important to understand how much tax you will owe.
Rates When Relief is Available
When first-time buyers qualify for relief, the SDLT rates are structured as follows:
– 0% for the first £425,000 of the property’s purchase price.
– 5% on any amount over £425,000 and up to £625,000.
Example Calculation
If a first-time buyer purchases a property for £600,000, here’s how the SDLT would be calculated:
– For the first £425,000: 0% tax = £0
– For the remaining £175,000 (£600,000 – £425,000): 5% tax = £8,750
So, the total SDLT due for a £600,000 property would be £8,750.
Previous SDLT Rates for First-Time Buyers (22 November 2017 – 22 September 2022)
During this previous period when relief was in effect, the SDLT rates were lower. The rates applicable were:
– 0% on the first £300,000 of the purchase price.
– 5% on the amount over £300,000 and up to £500,000.
Example Calculation During Previous Relief Period
Consider a scenario where a first-time buyer bought a property for £400,000 during this time. The SDLT would be calculated as follows:
– For the first £300,000: 0% tax = £0
– For the remaining £100,000 (£400,000 – £300,000): 5% tax = £5,000
Therefore, the total SDLT due would be £5,000.
Additional Considerations
Knowing these rates can help first-time buyers plan their finances better. SDLT can significantly impact the overall cost of purchasing a home, so understanding the relief options available is beneficial.
Eligibility for First-Time Buyer Relief
To take advantage of the SDLT relief for first-time buyers, certain conditions must be met:
– The buyer must be an individual or individuals (not a company).
– All buyers must be first-time buyers, meaning they have never owned a property before.
– The property must be purchased for residential use.
What Happens if the Property Costs More than £625,000?
If the purchase price of the property exceeds £625,000, the relief is no longer available, and standard SDLT rates apply to the entire purchase price.
For example, if a first-time buyer buys a property for £700,000, the entire amount would be subject to the standard rates, which are progressively higher based on the purchase price.
Important SDLT Rates for Properties Over £625,000
For properties bought at higher prices, the following standard rates are relevant:
– 0% on the first £250,000.
– 2% on the portion from £250,001 to £925,000.
– 5% on the portion from £925,001 to £1.5 million.
Example Calculation for Higher Purchase Price
If a property is purchased for £700,000 by someone not eligible for first-time buyer relief, the SDLT calculation would look like this:
– 0% on the first £250,000 = £0
– 2% on the next £450,000 (from £250,001 to £700,000) = £9,000
So, the total SDLT due would be £9,000.
SDLT and Shared Ownership
When purchasing a property through shared ownership, buyers may qualify for the same SDLT relief. The tax is based on the market value of the property being purchased and not just on the share being bought.
Example of SDLT in Shared Ownership
Suppose you are buying a 50% share of a property worth £400,000; the market value of the property is still considered for SDLT purposes. Here’s how it works:
– Market value: £400,000
– 50% share purchased: £200,000 subject to SDLT
Since £200,000 is below the threshold for the 0% rate, no SDLT is due.
How to Calculate Your SDLT
To calculate your SDLT:
1. Determine the purchase price of the property.
2. Identify if the purchase qualifies for first-time buyer relief.
3. Use the appropriate rates based on whether the purchase price falls under the thresholds for relief.
4. Add up the SDLT based on the purchase price brackets.
Key Terms to Remember
– Purchase Price: The final price paid for the property.
– First-Time Buyer: An individual who has not owned a property before.
– Relief: A reduction in SDLT based on specific criteria.
Where to Find More Information
For additional information and detailed guidance on SDLT rates, the HMRC website provides comprehensive resources. Specific pages may include:
– SDLTM29815 – SDLT rates when the relief is available
Keep this information in mind as you navigate the process of purchasing property and calculating the associated SDLT. Understanding these concepts can help avoid unexpected costs and assist in financial planning.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLT Relief Rates: 0% on £425k, 5% on £
