SDLT Rates and Reliefs

SDLT Rates and Reliefs

A real estate transaction is where the legal title of the property will be transfered from on person to another, for instance a sale, shift of equity or gift (remortgages where there is no transfer are liable for duty) and the amount of duty payable depends upon the particular consideration (purchase price) paid, the amount due being a proportion of the consideration, between 0% – 5%.

SDLT Thresholds:

Duty is charged at a different rate with respect to the amount of consideration covered for the property. The table below shows what rates are payable:

0 – 125k =0%

>125k – 250k =1%

>250k – 500k =3%

>500k =4%

From 06 April 2011 a new higher rate of 5% for transactions worth over 1,000,000 will be introduced.

First Time Purchaser Relief:

For deals concluded between 25 March 2010 and 24 March 2012 inclusive, in which the buyer is a first-time purchaser and also the price is 250k or less, the purchaser can get full respite from duty. An SDLT return will still have to be filled out and an SDLT5 certificate acquired.

Anyone (as opposed to an organization) who may never have owned a property, both on their own or jointly, anywhere in the world, is a first-time purchaser and may be eligible for relief. Anyone who has owned a property in the name of his company wouldn’t meet the criteria. Remember that someone who purchases a house in England or Wales but once was a resident in a different state and owned a property there would not be eligible. A person who possessed a property with a spouse orpartner but included in any divorce settlement or break up agreement didn’t maintain any interest or some of the equity would also fail to qualify.

Where two people are buying collectively and the other never owned a property but the other has, there will be no entitlement to relief for either party.

Disadvantaged Area Relief:

Certain areas of the nation are selected “disadvantaged areas” for the purposes of stamp duty. Over these regions entire relief from duty could be claimed on dealings between 125k – 150k. As with any claim for relief, an SDLT return must be filled out.

To assist you to see if an area qualifies for relief you may use the postcode search tool on the HMRC website. Just use the search box within the website and search “stamp duty land tax”. Be careful nonetheless that this kind of tool is not conclusive considering that places are separated by council ward instead of postcode plus the postcode search may not be correct for properties that are on the border of a disadvantaged area. In case you are uncertain, contact HMRC.

Equity Transfer:

Any sale of land that leads to a minumum of one of the original holders still left within the title following completion is called a transfer of equity. These kind of exchange do entice duty and also the consideration on which it is based is the sum of anything paid to an outbound owner or by an inbound one and the amount of liability for any mortgage loan that an inbound or remaining owner takes on. Both instances below illustrate this:

Illustration one: Jack and Jill got married and Jack makes a decision to add Jill on the deeds. The home is mortgaged and so Jill must become jointly liable for the debt. Unwilling to reap some benefits and Jack’s excellent character she likewise choosesto pay Jack for her portion. The home is worth 320k. The outstanding mortgage is for 200k leaving 120k of equity. Jill therefore pays Jack 60k and takes liability for 1 / 2 of the mortgage debt (100k). The sum of the consideration she has given therefore is 160k which means duty of 1.6k (1%) is payable. Whether or not she’s a first-time purchaser she can’t claim relief because Jack is not.

Example two: Ben and Holly possess a property together but have decided to split up. They aren’t married. The house is valued at 200k, and the outstanding mortgage is for 150k, for which Ben and Holly are collectively liable, leaving equity of 50k. Ben makes a decision to acquire Holly’s share and she concurs to sell it for 25k provided Ben takes sole responsibility for the mortgage loan, which he concurs to carry out. Ben consequently pays Holly 25k and assumes here half of the mortgage debt (75k) making a total consideration of 100k. Duty is therefore “payable” at 0%. Therefore although the financial transaction is not exempt and an SDLT return needs to be submitted, because the consideration is under the 125k threshold no tax is due.

Purchases That are Exempt From Stamp Duty

Certain transactions are exempt from the cost of stamp duty and from the necessity to lodge an SDLT return. The most prevalentillustrations are transfers in which the actual consideration is less than 40k transfers for no consideration (such as gifts), transfers of equity on account of divorce proceedings or the dissolution of a civil partnership, whether or not a Court Order has been made and assents. An assent is really a transfer by a personal representative of a deceased to proprietor to a beneficiary under a will, in order to give result to the deceased’s wished as mentioned in the will and to qualify for exemption it has to be completed using form AS1 or AS2.

A transfer of equity between an unmarried couple (or a couplewho’re not civil partners) made because of a separation doesn’t receive exemption and nor does a transfer by a personalrepresentative which is not an assent (i.e. a property sale).

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Question by BP: Any differences or advantage to file Married Seperate versus Single?
My friend seperated from his wife in Aug 2010, the divorce is supposed to be final later this month (Feb 2011). No children involved. They did run a business together during most of the tax year 2010 (small takeout restaurant). So right now they are legally seperated, pending the final divorce decree later this month. Should my friend file as Single, or Married Filing Seperately? Is there any difference in the taxes or deductions that would apply to him based on either filing status (Is one better than the other) ?? I told him I thought the tax rates and deductions were exactly the same for both, no difference. They have no dependents, no children, just the husband and wife. Please advise. Thanks.
should have clarified further – they are in Delaware – And yes he filed for the divorce in Oct 2010 thru his lawyer, who filed the initial divorce paperwork in court – so they are legally separated, but the actual divorce will not be final in court until later in Feb 2011. So from what I am hearing so far, it sounds like he has to file as “Single”, right ? (since apparently he is legally seperated)

Best answer:

Answer by the tax lady
Yes, there are differences, but he still has to file legally.

Are they “legally separated from your spouse under a divorce or separate maintenance decree”? Not all states have these. If yes and it was in place by 12/31/2010, they file single. If no, they file MFS.

For lower incomes, where both claim the standard deduction and no credits, the result is the same. For higher incomes, the tax rate is higher.

What do you think? Answer below!