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Stamp Duty Land Tax Rates

From 25 March 2010, first time buyers will benefit from an exemption from Stamp Duty Land Tax (SDLT) on the purchase of a property worth up to £250,000 if it is to be used as their only or main home. This relief will apply for two years from 25 March 2010.

From 6 April 2011 a new SDLT rate of 5% is to be introduced for residential property purchases of more than £1 million.

Baker Tilly analysis

The temporary relief, 'holiday', from Stamp Duty Land Tax (SDLT) which ended on 31 December 2009 on residential properties acquired for up to £175,000 provided a much needed boost to the housing market. This new relief will provide a further boost just as the market appears to be flagging and may be a significant help to those struggling to put together the deposit needed to gain entry onto the housing ladder.

The new 5% rate from April 2011 is intended to fund the first-time buyer relief but there is no indication that it will last for only two years. Whilst this increased rate of duty may encourage the SDLT avoidance fraternity, the new disclosure of tax avoidance schemes rules will enable HMRC to be aware of what activity is being undertaken.

In detail

Stamp Duty Land Tax is currently payable on a slab system with purchases of property of between £125,001 and £250,000 incurring an SDLT charge at 1%, for properties between £250,001 and £500,000 at 3%, and for properties of £500,001 or more at 4%.

Purchasers who are first time buyers who purchase their only or main home with an effective purchase date in the period from 25 March 2010 to 24 March 2012 will not pay SDLT if the purchase price is £250,000 or less. The effective date is usually completion date.

There will be detailed rules on who may qualify as a first time buyer which become more complicated if there are joint purchasers as both must qualify as first time buyers for the relief to apply.

The proposed introduction of a new higher rate for SDLT of 5% on residential property will apply to purchases from 6 April 2011. As a slab system is to continue to apply, this will mean that a property acquired on or after 6 April 2011 for £1,000,001 will incur SDLT of £50,000.