Stamp Duty Land Tax (SDLT). Everything You Need to Know

is there vat on stamp duty

If you want to know is there VAT on stamp duty? You need to learn about the Stamp Duty on Land Tax (SDLT). It helps the home buyers learn about the complications involved in this type of tax. In the United Kingdom, there is no single stamp duty land tax, so complications may arise. In case, you fail to make this payment on time or violate any section of this tax, you will be penalized by the HMRC. It is an obligation for all the homebuyers who meet the criteria of home buying in the United Kingdom and cross a certain threshold set for the valuation of the property.

In this blog, we will guide you about the Stamp Duty Land Tax (SDLT) and its different rates. Moreover, we will also discuss the relaxation of this tax and who is exempted to pay this tax. So, let’s start our discussion!


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What is Stamp Duty Land Tax (SDLT)?

Stamp Duty Land Tax is applicable to those people who are going to buy a new property of home either on mortgage, leasehold or freehold. Whatever the reason may be or the circumstances are, if you are buying a home, you are liable to pay the VAT on the stamp duty.

The rates might differ for each of the property valuations. For example, first-time home buyers are exempted from paying this tax. On the other hand, you have to pay this tax for buying an additional home or property in the United Kingdom.


When is SDLT Paid?

The person, except the first-time home buyer, is supposed to pay this tax after 14 days of the process of buying a home. If you make any delays in the payment of this tax, you will be penalized by the HMRC.

You can file your returns yourself or with the help of a solicitor. On the other hand, submit your file returns even if you don’t fall into the category of a file return except you are exempted from it.


What are the Different Rates of SDLT?

The different rates for Stamp Duty Land Tax (SDLT) begin at the valuation of the property at £125,000. If you buy a property below this threshold, the rates are zero for the buyers. On the other hand, with the increase in value after this threshold, the stamp duty land tax also increases.

If you are a first-time home buyer, you won’t pay this standard rate. However, if the purchase price of the house goes beyond the threshold of £300 000. You will pay the standard rate for the value after deducting the first £300 000.

Minimum property purchase price Maximum property purchase price Standard Stamp Duty Rates Stamp Duty Rates for Second home Buyers
£0 £125,000 0% 3%
£125,001 £250,000 2% 5%
£250,001 £925,000 5% 8%
£925,001 £1.5 million 10% 13%
Over £1.5 million 12% 15%

On the contrary, the additional 2% will be paid as SDLT, in case you are a non-UK resident for a property with a purchase price of more than £400 000. In other words, you have to pay the additional SDLT on the purchase price crossing the threshold of £400 000. If the price is less than this limit, you will not pay this tax.


Who is Exempted from the Stamp Duty Land Tax?

Although the first-time home buyer has been relaxed from the payment of the standard rate up to the first £300 000 purchase price of the house.

  1. Transfer of a property as a result of a divorce, separation or dissolution
  2. Property received as a result of a will
  3. Gifting the property to someone else


When and How to Get a Refund?

You can claim a refund of the SDLT higher rates if you have purchased an additional home and have sold the previous home within the first three years of the new home. In other words, suppose you own a previous home and want to sell it. But you fail to sell it. Now, you have purchased a new house. So, you have to pay an additional 3% as SDLT.

If you sell your house within three years of the new home buyer, you can claim a refund of the additional rates. Similarly, you can claim this refund within the first 12 months of filing the SDLT tax returns or the sale of a previous home.


The Bottom Line

The conclusion is that SDLT is payable by the persons who are buying an additional property and the purchase price of the house is more than £125000. However, the first home buyers are exempted from this unless the cost of a house is £300 000. Similarly, non-UK residents are not liable to pay this tax unless the property buying price is beyond £400 000.

The first-time home buyers will pay the standard rate on the additional charges after the threshold, while the non-UK residents will pay an extra 2% on the standard rates after the threshold of the set price. Besides, second-time home buyers have to pay an additional 3% on the standard rates.

Lastly, you can claim the refund of the SDLT after you have sold your previous property and become a first-time home buyer. The duration for claiming this refund is 12 months after the sale of the previous property or the tax filing of the SDLT. The condition is you must sell your house in the first three years of buying a house. The question of is there vat on stamp duty is no more a hassle after reading this detailed article.


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Disclaimer: All the information provided in this article on Is There Vat on Stamp Duty, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.