UK Stamp Duty
Stamp duty is a tax paid to Her Majesty's Revenue and Customs (HMRC) on the transfer of ownership of property and shares in the UK and the current stamp duty rates are shown below.
For houses the tax is called Stamp Duty Land Tax (SDLT) the transfer of shares are subject to Stamp Duty or to Stamp Duty Reserve Tax (SDRT) depending on the type of transaction that's taken place.
The current system was introduced in 2003 as a % of the total sale of the property but also means that solicitors complete all the necessary paperwork and sign a land transaction return form with the purchase details within it. It was meant to stop people selling a house for much less than it was worth and then charging a lot for fixtures and fittings to avoid going into the next tax band.
Stamp Duty Land Tax Rates - Residential
The rate of SDLT used to be a flat 1% under the conservative government in the 1980s and 1990s but since New Labour have been in power they have increased the tax on higher value property sales. The current rates of stamp duty that are a percentage of the value of the property when ownership is transferred are as follows (rates changed on September 2008).
These are for freehold residential properties or land sales and the initial rate of 0% is until September 2009 where it may be changed again. This minor change was provided by the Chancellor to help families through the credit crunch but as the housing market has collapsed it may not be what first time buyers need to buy their house.
|Property or Land Value||% Rate|
|Over £175,000 and up to £250,000||1%|
|Over £250,000 and up to £500,000||3%|
The rate payable is on the whole amount for where the property value falls (ie: you don't get £175,000 in free tax). For example, a property sale of £175,000 you pay no tax but for a value of £175,000.01 you pay 1% on the whole amount, ie: £1,750.
Stamp Duty Land Tax Rates - Commercial
Commercial properties have different rates of SDLT as follows:
|Purchase price||Tax Rate|
|Up to £150,000 - annual rent is under £1,000||Zero|
|Up to £150,000 - annual rent is £1,000 or more||1%|
|Over £150,000 to £250,000||1%|
|Over £250,000 to £500,000||3%|
Up to date information on the rates charged by HMRC can be found on their website here
Avoiding Stamp Duty
As with all taxes it may be difficult to avoid stamp duty charges although there are exempt areas and different levels for disadvantaged areas (although currently these rates are less favourable than the standard rates shown above).
People who charge less for their home and value their fixtures and fittings at an unrealistic rate may have their sale scrutinised by the Inland Revenue who can investigate sales for up to 9 months after the transaction has completed.
Stamp Duty on Shares
There are two types of duty levied on share purchases. Stamp Duty Reserve Tax (SDRT) is payable when stockbrokers use the CREST electronic trading systems which almost all of them do these days. It's a flat 0.5% of the purchase price paid no matter what the shares are actually worth.
For all other transactions that use a stock transfer for the percentage is still 0.5% on the price paid for shares but rounded up to the next £5.