Stamp Duty Reliefs And Exemptions
Who Is Exempt From Paying Stamp Duty?.
Stamp Duty Reliefs And Exemptions.
Stamp Duty Land Tax or SDLT is a tax charged by the Government on the acquisition of land in England and Northern Ireland. Scotland charges Land and Buildings Transaction Tax and Wales charges Land Transaction Tax.
There are certain situations where the transfer of property does not result in stamp duty costs in the UK. However, it is important to consider all the relevant details before deciding that no stamp duty costs are due.
Here is a list of occasions where Stamp Duty Exemptions may apply:
Transferring Property To Spouse/Civil Partner/Co-Habitees
If you transfer a property into your spouse or civil partner’s name, there is no specific stamp duty relief for the transfer unless you are separating or getting divorced. However, transfers for ‘no consideration’ are exempt and transfers in connection with separation or divorce have specific stamp duty exemptions (see below).
There is no SDLT due on the transfer of property to a spouse unless there is a mortgage on the property. If there is a mortgage on the property in question, then SDLT may be due on the transfer of the relevant part of the mortgage – as this would be a ‘consideration’ for SDLT purposes. For example: if spouse A is transferring the beneficial ownership in their 50% of the property, SDLT will be payable if the outstanding mortgage is greater than £250k (as their 50% share would then exceed the 0% threshold of £125k).
There is always a requirement to notify HMRC about these transactions via an SDLT return. Our UK Stamp Duty Calculator can work out the stamp duty owed on a transfer of property to a spouse.
Divorce
The transfer of property between husband and wife or civil partners enjoys stamp duty exemptions upon divorce or separation if the transfer is made under a court order or under an agreement between the couple in connection with the dissolution of their marriage or a separation order.
If you were married to each other or in a civil partnership and the purchase is made under a separation agreement or court order then no stamp duty will be charged.
If a couple separate permanently without getting a court order, they will be treated for SDLT purposes as an unmarried couple. For the purposes of the 3% surcharge, each spouse can buy a property without being considered as owning any property the other spouse owns. This also means that transfers of property between them will be exempt from stamp duty costs in the UK.
In these cases there’s no need to tell HMRC about the transfer, even if the value is more than the SDLT threshold.
Calculate Stamp Duty UK with our online calculator.
There is no SDLT due on the transfer of property to a spouse unless there is a mortgage on the property. If there is a mortgage on the property in question, then SDLT may be due on the transfer of the relevant part of the mortgage – as this would be a ‘consideration’ for SDLT purposes. For example: if spouse A is transferring the beneficial ownership in their 50% of the property, SDLT will be payable if the outstanding mortgage is greater than £250k (as their 50% share would then exceed the 0% threshold of £125k).
There is always a requirement to notify HMRC about these transactions via an SDLT return. Our UK Stamp Duty Calculator can work out the stamp duty owed on a transfer of property to a spouse.
Gifting Property
Stamp duty would not be payable with a deed of gift, as it is only payable if there is a mortgage attached. HMRC will still make the giver liable for Capital Gains Tax should the property being gifted be considered a second home.
If you take over some or all of an existing mortgage, you’ll pay SDLT if the value of the mortgage is over the SDLT threshold.
Property Left In A Will
If you get land or property left to you in a will, there is no need to notify HMRC and you will not pay SDLT. This applies even if you take over an outstanding mortgage on the property.
A Building Company Buys Your Home
If a building company or property trader buys your home and you are buying a new home from them, the property bought by the house builder or property trader is exempt from SDLT if certain conditions are met.
You must:
- Have lived in the property as your main or only home at some time during the 2 years before the building company or property trader bought it
- Buy a new home from the house building company
- Intend to live in the new property as your main or only home
Also, the area of land that the building company or property trader buys along with the old home must not go above a certain size – normally 0.5 hectares.
Employer Buys Employee’s House
If an employer or property trader buys a person’s house because they are moving with their work, there are stamp duty exemptions if certain conditions are met.
These are:
- The employee lived in the house as their main or only home at some time during the 2 years prior to their employer buying it
- The employer or property trader is buying the house because the employee must move as a result of a job relocation
- The price the employer or property trader pays isn’t more than the market value of the property
- The area of land the employer or property trader buys is within certain limits – normally 0.5 hectares
Compulsory Purchases
Sometimes a local authority will make a Compulsory Purchase Order on a property so that a development by another party can go ahead. The owner of the property then sells it to the local authority who sells it to the property developer.
As there are 2 sales, there would normally be 2 lots of SDLT to pay but, if the property developer is completing the development, the local authority can get relief from SDLT.
An organisation that has the power to compulsorily buy land or property can claim this relief. They can still claim even if the sale isn’t made under those powers if the sale allows development by a third party.
Property Developer Subject To Planning Obligations
When giving planning permission to a developer, a planning authority might ask the developer to provide amenities for the community such as a play park. These are known as ‘planning obligations’.
Usually the developer transfers the building to the local authority to run once it’s finished but there may be 2 charges of SDLT if the developer buys the land from its original owner and then transfers the finished building to the local authority.
The developer can claim the relief so that they don’t pay SDLT on the first sale.
Transfer Of Property Between Companies
Companies can claim relief when buying from within the same group. The buyer of the property can claim the relief if:
- The buyer and seller are both companies
AND
- At the date of transaction, both companies are members of the same group
Our UK Stamp Duty Calculator can work out the stamp duty owed on all property purchases.
Registered Social Landlords
Registered social landlords can claim relief from SDLT if either:
- The majority of board members of the registered social landlord are tenants living in properties from the social landlord
- The seller of the property is a ‘qualifying body’, for example a local council
Calculate Stamp Duty UK with our online calculator. Simply key in the price of either your main or an additional property and you will know the cost in seconds.
Right To Buy Properties
A Right to Buy transaction is the sale of a property is a property which is either:
- Sold at a discount by a public sector body like a local housing authority
- Where there is a preserved right to buy
In either, this covers the grant of a lease of a dwelling. Stamp Duty costs in the UK are worked out on the discounted price the buyer pays. It does not include any additional payments which may become due.