Changes In Stamp Duty Land Tax (SDLT) On Residential Property
When you purchase a property or land over a certain price in England and Northern Ireland, you’re required to pay Stamp Duty Land Tax. Over the years, the government has made changes to the tax with the recent efforts made to ensure it doesn’t hold back first-time buyers, as our personal tax accountants explain.
What is Stamp Duty Land Tax?
Stamp Duty Land Tax or SDLT is a tax charged on the purchase of property or land over £125,000 for residential properties and £150,000 for non-residential properties in England and Northern Ireland. Your tax is different if your property or land is in Scotland or Wales. On this gov.uk page, you can find a calculator which can work out the SDLT you’re liable for.
Stamp Duty Land Tax changes
Stamp Duty Land Tax was first introduced in England and Northern Ireland in 2003. The threshold for residential properties was raised from £60,000 to £120,000 in 2005, then to £125,000 a year later which continues to this day.
In 2014, the Government made another reform by removing the slab element, meaning the tax is paid on the amount above a certain threshold rather than one rate on the total amount. It is done so to be fair and to lower the amount you’re liable for in many instances. For example, if you sold a house for £500,001 before 2014, you were liable for £20,000 in SDLT. If you’re selling the house for the same amount after 2014, your SDLT is only £15,000.
In 2016, the Government introduced a 3% surcharge over the standard rate for buyers of second homes.
In 2017, first-time buyers don’t have to pay any Stamp Duty tax up to £300,000, then 5% on the portion from £300,001 to £500,000. If the purchase price is above £500,000 you will pay the standard rates.
When to pay
You’re required to pay Stamp Duty within 30 days of purchasing your property, otherwise you risk a fine plus interest. The process of paying is simple – you go to this gov.uk page and fill in a SDLT return form. Do note that you still need to fill in a SDLT form even if your home is less than £125,000 for non-first-time buyers.
Is there a way to reduce the Stamp Duty Land Tax?
Some people would advise you purchase a piece of land and build the house yourself, while some may suggest using a Limited Company to purchase. It is best for you to discuss your situation with an experienced Tax Accountant first for an obvious reason – it is a criminal offence to evade Stamp Duty Land Tax and we don’t encourage anyone to take short-cuts. Also, purchasing a property through a company actually requires you to pay a 15% tax, although there are certain conditions where the 15% rate does not apply, such as when the company acts in its capacity as a trustee of a settlement.
Berley can help with Stamp Duty Land Tax and other personal tax matters
Stamp Duty Land Tax is straightforward and the current law is designed to help first-time buyers and be fair to non-first-time buyers too.
However, SDLT exemption can be far-reaching and complicated. For instance, to purchase a leasehold property, have an alternative property finance, inherit a house from a relative, sell your house due to a divorce, are some of the exemptions and a few of them have specific conditions attached.
If you would like to know more about Stamp Duty Land Tax or stay on top your personal taxes, give our personal tax accountants a call. Get in touch on 020 7636 9094 or fill in our Online Form.
Autumn Statement 2014 - Remittance Basis Charge for non UK Domiciled Individuals
If you are a non UK domiciled long-term UK resident Remittance Basis Taxation or RBC, allows you to pay income tax and capital gains tax on your overseas investment income and gains only if these income and gains are brought into the UK and then on an annual basis. The Chancellor had said that the government wouldn't make any further changes to non-domicile taxation, including the RBC, for the 2010-2015 Parliament.
So, true to his word, the Chancellor announced on 3 December 2014 changes to the Remittance Basis Charge (RBC), payable by those who are resident but not domiciled in the UK, which will take effect in the next Parliament:
- The RBC payable by those who have been resident in the UK for 12 out of the last 14 years will increase from £50,000 per tax year to £60,000 per tax year
- A third level of RBC will be introduced for non-domiciliaries who have been resident in the UK for 17 out of the last 20 years, set at £90,000 per tax year (which mirrors the deemed domicile rules for inheritance tax)
- There will be a consultation on whether the RBC should apply for a minimum of three tax years to prevent non-domiciliaries from arranging their affairs to pay the charge only occasionally
The RBC for those who have been resident in the UK for at least seven out of the last nine tax years will remain unchanged at £30,000 per tax year. According to the Statement, these changes will be introduced in Finance Bill 2015, however it is assumed that since the final bullet point will be subject to the consultation process, only the first two are likely to be legislated next year.
It is unclear whether these changes will be effective from the 2015/16 tax year or from the 2016/17 tax year.
Read more about non UK domiciled tax here.
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HMRC Credit Card Sales Campaign
HMRC are on the warpath again
This time it is businesses who accept payment by cards and have not reflected all transactions in a return. Predictably, HMRC wants to recover all the taxes payable by companies or individuals who use credit or debit cards to take sales orders.
Many businesses use credit or debit cards to process orders during the normal course of their business. This could be over the phone, directly in-store through a POS terminal or online through an commerce store. Given the variety of different transactions processing options available to a business, such as directly by your bank or through a multiple third party transaction gateways (such as PayPal and over 20 others), potential exists for under reporting sales.
Use the Credit Card Sales Campaign's disclosure facility if:
- You or your business accept card payments for goods or service
- You or your business haven’t declared all your UK tax liabilities
Through the Credit Card Sales Campaign, HMRC is providing an opportunity to bring your business's tax affairs up to date. HMRC has been steadily investing in new systems that can track business and personal transactions, and so there's not much they don't already know about you and your business. You shouldn't be surprised then to learn that HMRC has details of all credit and debit card payments to UK businesses and this information is used to identify individuals and businesses that might not have paid what they owe.
Get the best terms
You need to tell HM Revenue and Customs (HMRC) if you either:
- Haven’t registered with them
- Have failed to declare all your income
The Credit Card Sales Campaign Voluntary Disclosure Process
As with other recent opportunities HMRC have presented businesses, there’s a procedure to follow.
You must first notify HMRC that you or you business wants to take advantage of the scheme. You are then required to make a full disclosure covering your income, capital gains, taxes paid and any duties. This has to be done within four months of HMRC acknowledging your participation. Once done, you have to make a formal offer of amounts to be payed, then payment and cooperation with HMRC.
One oddity with the new scheme is that HMRC invites those making a voluntary disclosure, to tell them how much of a penalty they should pay. Naturally, HMRC have provided some guidance, stating that, depending on your particular circumstances, full disclosure penalties will be levied at 0%, 10% or 20%. If you have an offshore disclosure to make, expect higher penalties.
Be warned though; if you think you have exposure to underpaid or non paid taxes due to credit or debit card sales, you need to act first. Remember, HMRC’s systems have details of all of these types of transactions. If they contact you first, you will not be able to take advantage of this disclose opportunity and face penalties of up to 100% - 200% for offshore liabilities, plus potential criminal prosecution if the circumstances are serious enough.
If you feel that this situation may apply to you or your business and would like to take advantage of the Credit Card Sales Campaign disclosure scheme, Berley can help. As with all matters with HMRC, care must be taken to ensure the correct method and level of disclosure is made and that the required process is followed and the Disclosure Form is carefully filled out. Let Berley ensure no mistakes are made and that the process is complete within the four months allowed.
Jan Lockley
Head of Tax
HMRC's Latest Property Crackdown
Earlier in the year we sent emails to client’s regarding HMRC’s ‘amnesty’ of the Let Property Campaign – following on from this the group to come under the microscope of HMRC’s latest task force will be property owners who are either letting or selling property and not declaring the income tax or capital gains tax due.
Initially the taskforces will be primarily focused on properties held in the South West of England and South Wales.
It is assumed that HMRC feel that a lot of people have second homes, holiday cottages or rented properties in these areas. Also parts of these areas will have enjoyed significant growth in house prices over recent years.
The taskforce will be looking for two types of undisclosed profits:-
- Taxable gains on sales of properties
- Rental profits
The taskforce is likely to review the Land Registry's records of properties bought and sold and then match each record to the taxpayer's Tax Returns for that year.
There could be difficulties in respect of claims to Principle Residence Relief, for the taskforce, but there should be ways of working out from public records who has and who has not lived in a property that has been sold – however as we know HMRC are not infallible.
If a you think that they may have a gain which has not been disclosed to HMRC, then all is not lost. The overall result will invariably be better, in terms of penalties and HMRC's general attitude, if a late disclosure is made. Also time can be taken to look at all the reliefs available to you, to make sure that any taxable gain returned is as low as possible.
The method of disclosure can be discussed before it is made, but the avenues available include the Let Property Campaign – as mentioned above - which potentially provides better terms for disclosure.
Jan Lockley
Head of Tax