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TAX TIP TUESDAY: Do you understand Stamp Duty?

Our 5-minute read – Tax Tips – for UK doctors and dentists will help you save tax, get organised with your tax affairs and make sure you meet important deadlines with ease.

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice. 

You might know that you need to pay stamp duty when you purchase property in England (and Northern Ireland) but there’s so much you may not understand about one of the UK’s most complicated taxes. Stamp duty land tax (SDLT) is rife with complex rules, exemptions, surcharges, and idiosyncrasies – and not understanding these could mean really paying the price.

Here are a few common questions many taxpayers have when it comes to stamp duty.

Q: If I have a share in an ex-matrimonial home but cannot access it until after the children are 18, do I need to pay extra stamp duty if I wish to purchase a property?

A: No, this is one of the special cases associated with SDLT. There is an exemption written in for divorcees so you don’t need to worry about the extra surcharge. You should confirm with your lawyer that your Mesher order subjects you to a Property adjustment order before proceeding with any purchases.

Q: If I already own a commercial property, will I need to pay stamp duty on a residential property?

A: Luckily, if it is your first residential property purchase you will receive the first-time home buyer stamp duty exemption.

Q: If I add my partner to my mortgage, will they need to pay stamp duty?

A: That depends. Stamp duty is charged on transactions of £125,000 or more, so if their share will equal or exceed this amount, then it will be owed. Of course, there are ways to split ownership so that this doesn’t happen, but you and your partner must consider the potential of an unequal stake in the property in this case.

Q: Does inheriting a property mean I forfeit a first-time buyer exemption on future purchases?

A: The way the rules are worded, stamp duty is only waived for homebuyers who have never previously owned a stake in a property. So technically, inheriting a property would indeed mean you lose the benefit if you wish to buy another property.

Q: If I purchase a new home without having sold my old home, will I be liable for the extra surcharge?

A: Unfortunately, there’s no buying/selling buffer built into the stamp duty laws so you will be subject to a surcharge in this case. However, you can claim back the additional tax charged within three years.

Q: If one of the spouses in a couple has already owned a home, will the partner that hasn’t be responsible for stamp duty?

A: Unfortunately, yes. The verbiage in the tax does not distinguish between the individuals and only looks at the unit for purchasing. So, if one of you has already owned a home, there’s no first-time buyer exemption for the pair.

Q: If I buy my first home but plan to rent it out, will I still qualify for the first-time homebuyer exemption?

A: No, the rules clearly state that an individual must plan to make the home their primary residence to qualify for the exemption.

Are there any questions you have about stamp duty that we’ve missed? Let us know!

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