Do You Know Your Tax Duty?

Do You Know Your Tax Duty?

5 April 2017
Do You Know Your Tax Duty?

Stamp Duty Land Tax (SDLT) is payable on non-residential or mixed-use land or property, in tranches, over £150,000.

The freehold duty rate tranches:

Up to £150,000   = Zero
£150,001 to £250,000  = 2%
£250,000 and beyond  = 5%

E.G. tax payable on an office building bought for £1M:

0% of first £150,000  = £0
2% of next £100,000  = £2,000
5% of next £750,000  = £37,500

TOTAL SDLT   = £39,500

The rules vary for leasehold transactions as you pay SDLT on the lease purchase price and the value of annual rent payable (if under £150K then tax is not payable).  These two sums are calculated separately and added together.  One exemption to the rule is if you assign an existing lease then SDLT is only payable on the sum paid for the lease.

The tax tranches payable on the annual rent payable are:

£0 - £150,000   = Zero
£150,001 - £5,000,000  = 1%
Properties above £5,000,000 = 2%

E.G. tax payable on a new 5 year lease, paying £50,000 per annum subject to a premium of £160,000

a) Premium £160,000 is £10,000 over £150,000 threshold so 2% of £10,000 = £200

b) Net present value of rent £50,000 x 5 years  =  £250,000
 £150,001 - £250,000 = £99,999 @ 1%  = £999.99

Tax payable     = £1,199.99 

Refer to Stamp Duty Land Tax - and always take advice from your solicitor and accountant.

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