Recent months have seen a number of significant changes to tax on property, with reform of stamp duty land tax (SDLT) and the introduction of a new Land and Buildings Transaction Tax (LBTT) in Scotland. Here we provide an overview of the new rules.
Changes to SDLT
In the 2014 Autumn Statement Chancellor George Osborne announced changes to the rules for calculating the SDLT chargeable on purchases of residential properties, with the scrapping of the ‘slab’ system in favour of a graduated series of rates and bands. The reforms came into effect on 4 December 2014. The existing SDLT rules for non-residential or mixed properties remain unaltered, and the provisions relating to non-natural persons are also unchanged.
Under the old rules, SDLT was charged at a single percentage of the price paid for the property, depending on the rate band within which the purchase price fell. However, SDLT is now charged at each rate on the portion of the purchase price which falls within each rate band.
Furthermore, from April 2016, the rates of SDLT will be higher if you purchase an additional residence property for £40,000 or more in England, Wales and Northern Ireland. The rates are an additional 3% on top of the standard rate.
The new rates and thresholds are:
|Property value band||Rate||Additional Rate|
|£0 – £125,000||0%||3%|
|£125,001 – £250,000||2%||5%|
|£250,001 – £925,000||5%||8%|
|£925,001 – £1,500,000||10%||13%|
|£1,500,001 and over||12%||15%|
HMRC has published an online calculator to help individuals calculate how much SDLT they will need to pay. The calculator can be viewed at: www.hmrc.gov.uk/tools/sdlt/land-and-property.htm
The new Land and Buildings Transaction Tax in Scotland
1 April 2015 saw the introduction of the new LBTT, which replaces the UK system of stamp duty in Scotland. LBTT is applied to residential and commercial land and buildings transactions (including commercial purchases and commercial leases) where a chargeable interest is acquired.
Similarly to SDLT, the rates of LLBT will be higher if you purchase an additional residence property for £40,000 or more in Scotland. The rates are an additional 3% on top of the standard rate.
For residential property transactions, LBTT is charged at the appropriate rate on the amount of the chargeable consideration within the appropriate bands. The LBTT rates for 2015/16 are set as follows:
|Up to £145,000||0%||3%|
|£145,001 – £250,000||2%||5%|
|£250,001 – £325,000||5%||8%|
|£325,001 – £750,000||10%||13%|
|£750,001 and over||12%||15%|
For non–residential property transactions, the rates and bands are:
|Up to £150,000||0%|
|£150,001 – £350,000||3%|
|£350,001 and over||4.5%|
Further information on the new tax can be found at: www.revenue.scot/land-buildings-transaction-tax