Stamp Duty - How has it changed?

There was a time when Stamp Duty payable on the purchase of the property was simple in that there was a fixed percentage payable on all types of property if the purchase price exceeded a threshold which was intermittently raised with inflation. Subsequently, thresholds were introduced which were unfair as each price threshold marked an increase in the duty paid which, at that time, was paid on the whole purchase price so that between £250,000 and £250,0001 there was a jump in the duty payable of £5,000. The system was made fairer when it was changed so that the relevant percentage was only paid on each individual band.

Then the complication started. Firstly, an entirely different level of duty was introduced for commercial property, which also included mixed-use property such as a shop with the residential flat above. The starting point was higher and the thresholds slightly different. Then a higher rate was introduced if you were to own more than one property at the same time anywhere in the world. This involved a 3% levy on top of the standard rate on a second residential property purchased which was not being used as the main residence. This was supposed to slow the buy to let market, although it also penalised developers whose sole intention was to improve a property for the benefit, quite possibly, of first-time buyers and sell it on.

Then we had an exemption for first-time buyers, which resulted in a nil rate or substantially reduced rate on any purchase up to £500,000. Unfortunately, how this exemption can be applied can be very complicated as there are many anomalies whereby it cannot be claimed. It also interacts with the higher rate duty if more than one property is going to be owned. Whether you are single or joint buyers, buying freehold or leasehold, buying in your own name or as a Trustee can result in the exemption being lost. You must, therefore, take detailed advice as to the rate payable.

Finally, we have many clients who purchase in Wales and since April 2018 there has been an entirely different tax regime with different rates on residential and commercial property, a higher starting point but no first-time buyer exemption. All of which is calculated to confuse the expert, never mind the layperson trying to buy a property. We might ask why does the UK tax system, in general, have to be so complicated? Main beneficiaries are the tax advisors!