Understanding Stamp Duty in the UK: How Much Will You Pay?

Stamp Duty Land Tax (SDLT), commonly known as stamp duty, is a tax that is paid by individuals, overseas buyers, and companies who buy property in the UK. This tax is levied by the UK government and is based on the value of the property being purchased. In this article, we will discuss stamp duty in the UK, the costs for individuals, overseas buyers, and companies, and how the costs are calculated.

Costs for Individuals Stamp duty rates for individuals in the UK are determined by the purchase price of the property. The rates are as follows:

• No stamp duty is payable on properties worth up to £125,000.

• 2% is payable on properties worth between £125,001 and £250,000.

• 5% is payable on properties worth between £250,001 and £925,000.

• 10% is payable on properties worth between £925,001 and £1.5 million.

• 12% is payable on properties worth over £1.5 million.

For example, if an individual is purchasing a property worth £300,000, they will pay 2% on the amount between £125,001 and £250,000, and 5% on the amount between £250,001 and £300,000. The total stamp duty payable would be £5,000.

Costs for Overseas Buyers Since April 2021, overseas buyers of residential property in England and Northern Ireland have been subject to an additional stamp duty surcharge of 2%. This surcharge is in addition to the standard stamp duty rates mentioned above. Overseas buyers are defined as individuals who are not UK residents or companies that are not incorporated in the UK.

For example, if an overseas buyer is purchasing a property worth £500,000, they will pay 2% on the amount between £125,001 and £250,000, 5% on the amount between £250,001 and £500,000, and an additional 2% on the entire purchase price due to the surcharge. The total stamp duty payable would be £30,000.

Costs for Companies Companies purchasing residential properties in the UK are subject to the same stamp duty rates as individuals, with one key difference. If a company purchases a property worth over £500,000, they are subject to an additional 3% stamp duty surcharge, on top of the standard rates mentioned above.

For example, if a company is purchasing a property worth £750,000, they will pay 2% on the amount between £125,001 and £250,000, 5% on the amount between £250,001 and £925,000, and 10% on the amount between £925,001 and £1.5 million. They will also pay an additional 3% on the entire purchase price due to the surcharge. The total stamp duty payable would be £63,750.

Calculation of Stamp Duty Stamp duty is calculated based on the purchase price of the property. The rates are applied to different bands of the purchase price, and the tax is calculated as a percentage of the value in each band. The total tax due is the sum of the tax payable on each band.

For example, if an individual purchases a property worth £350,000, they will pay 2% on the amount between £125,001 and £250,000, and 5% on the amount between £250,001 and £350,000. The calculation would be as follows:

• 2% of £125,000 = £2,500

• 5% of £100,000 = £5,000

• Total stamp duty payable = £7,500

In conclusion, stamp duty is a tax that individuals, overseas buyers, and companies need to pay when they purchase property in the UK. The cost of stamp duty depends on the purchase price of the property, and the rates vary based on different bands of the purchase price. In addition, overseas buyers and companies may be subject to additional surcharges.

It is important for buyers to factor in the cost of stamp duty when budgeting for a property purchase in the UK. It is also worth noting that the rules and rates for stamp duty may change over time, so it is advisable to refer to gov.uk for up-to-date information.

Is Your UK Property Owned by a Company? Here's What You Need to Know About ATED Tax

In the UK, ATED (Annual Tax on Enveloped Dwellings) is a tax that is payable by certain property owners. It applies to residential properties that are owned by a company, a partnership, or another type of corporate entity, rather than an individual.

If the property is valued at £500,000 or more and is owned by a company or corporate entity, then the property owner may be required to pay ATED tax. However, there are exemptions and reliefs available which means that not all property owners will have to pay the tax.

The amount of ATED tax payable depends on the value of the property and ranges from £3,700 to £232,350 per year. The tax is payable annually and the deadline for payment is usually 30th April each year.

It is important to note that if the property is used for commercial purposes, such as a hotel or a rental property, then ATED does not apply. Also, if the property is owned by an individual rather than a corporate entity, then ATED does not apply.

Buy-to-let investors may be eligible for exemptions and reliefs, including ATED relief, if their property rental business is held within a company and the property is let to a third party rather than being occupied by the owner or anyone connected to them. However, it's important to note that a separate return is required for each property and the exemption from ATED must be claimed.

It is advisable to consult with a tax professional or HM Revenue & Customs (HMRC) to determine whether ATED applies to your property and how much tax you may be liable to pay.

As of the 1 April 2023, these are the current rates:

Purchasing a Property in the UK: Information for US Buyers

Michael Lewis, a Director at US/UK Tax experts Frank Hirth spoke to The American magazine’s Michael Burland ahead of 2019's UK General Election, looking at how the UK property market might unfold during 2020, and offering some key information that Americans looking to buy in Britain should be aware of.