Stamp Duty also known as Stamp Duty Land Tax or SDLT is a direct taxation applied to property purchase transactions. It is the buyer that has to pay this tax.
It has been called stamp duty because a stamp is embossed on the transfer record form to show that the duty has been paid. The tax is payable on any UK land or property exceeding 125k in value and is levied in slices according to percentages applied to that slice.
Unfortunately stamp duty (see the linked website) can add a lot to the cost of purchasing a property, however, this is a government tax, and is nothing to do with the solicitor.
Thanks to the budget that was declared on 22nd of November 2017, the government instantly abolished this duty for first time buyers on property purchases up to 300k which is viewed as a big help in assisting first time buyers to be able to afford their first home.
It is arguable as to whether the abolishment of the tax altogether will help to boost the UK house buyers as some, mainly opposition, politicians believe that this would not lead to a net reduction in the cost of buying as house as they believe that the property owners would just push up the asking price of the property anyway.
When your solicitor or licensed conveyancer records the transfer of title to land or property they will use a form called a TR1. The form has 13 boxes with which to enter the following information:
- The amount of stamp duty payable.
As stated, this is calculated depending on applied bandings where the percentages affecting the amount slice will vary.
- The title number
- Postal address of the property
- Transfer date
- Transferor – name of person or body making the transfer
- Transferee – name of person who will become new owner as per contract of sale
- Transferee address
- Description of transfer
- The consideration (purchase price)
- Title guarantee
- Declaration of trust – if applicable
- Any additional provisions details. This will detail whether any covenants that have been entered into. In cases of land purchases where a covenant was entered into the seller can still remain liable for the covenant even after the land is sold. Sellers normally add another covenant obligation on the buyer to indemnify the seller if there are any future breaches of covenant.
- Signatures of parties to the transfer
It is also worth noting that SDLT is a transaction tax unlike the old Stamp Duty which was a tax on the documentation. What this means is that SDLT is payable within 30 days of the effective date. Under the old tax it was clear that the effective date was the documentation date however under the new assessment the effective date is deemed to be the completion date or the date that possession is granted to the buyer so it is important to ensure that granting early possession prior to receipt of funds and actual legal completion does not accelerate the effective date from which the duty is payable as no doubt penalties and interest could be levied by HMRC if payments are deemed as received late.