Newsletter – February 2012

eNEWS – February 2012

In this month’s enews we report on guidance which has been issued on cookies together with several HMRC announcements. Please contact us if you would like any further information.

 

 

EU Cookies

The Information Commissioner’s Office (ICO) has published guidelines on the business use and storage of cookies.

The law which applies to how businesses use cookies and similar technologies for storing information on a user’s equipment such as their computer or mobile device changed on 26 May 2011. The ICO guidance on the new cookies Regulations sets out the changes to the cookies law and explains what steps businesses need to take to ensure they are complying.

Following an EU Directive, businesses are now obliged by law to obtain the explicit consent of each of their websites’ visitors before storing any data on their device. Websites must also provide ‘clear and comprehensive information’ about the purposes of the storage.

The UK actually introduced the amendments on 25 May 2011 through The Privacy and Electronic Communications Regulations 2011. However, website owners have been given until May 2012 to make their websites compliant with the new legislation.

It remains to be seen how strictly this law will be enforced, but the ICO have already introduced a maximum penalty of £500,000.

Internet link: ICO cookie guide

Pensions Auto Enrolment Dates deferred for smaller employers

The timetable for the introduction of Pensions Auto Enrolment has been revised for smaller employers.

Employers have been aware for some time now that the government is to introduce legislation designed to encourage more people to save for their retirement.

Under the rules employers must:

  • ‘auto-enrol’ eligible employees into a pension scheme
  • make employer pension contributions for them, and
  • make deductions of employee pension contributions from the employees pay.

The rules come into force from October 2012. However they only impact on the largest employers from that date, as few employers have a workforce of more than 120,000. For those employers with a more modest number of employees the start dates have been amended. This was previously announced and has been confirmed in a written ministerial statement.

Steve Webb, the Minister of State, Department for Work and Pensions confirmed:

‘On 28th November 2011, the Government announced that the timetable for the implementation of automatic enrolment will be adjusted so that small businesses are not affected by the reforms during this Parliament. This will provide them with some additional breathing space to prepare for the reforms whilst operating in tough economic times.’

‘I can now confirm that under the revised timeline, all employers with an existing staging date of on or before 1st February 2014 are unaffected. This means that no large employer will have to make any changes to their plans – which are in many cases already advanced.’

Medium sized employers will be re-allocated automatic enrolment dates between 1st April 2014 and 1st April 2015. This means that the implementation dates of some of these employers will be up to nine months later. However, this still means that around 70% of eligible workers will be automatically enrolled before the end of this Parliament compared with around 75% under previous arrangements.’

‘Small employers will be allocated automatic enrolment dates between 1st June 2015 and 1st April 2017.’

The guidance contains a table of revised implementation dates for small and medium employers, by size. We will keep you informed of further announcements.

More information on employers’ obligations is available on the Pensions Regulator website or please do contact us.

Internet links: Pensions Regulator website Statement

New approach to records checks from HMRC

HMRC have announced that they intend to make changes to their business records checks programme following a review of the pilot scheme.

HMRC will now postpone making any new business records check appointments until the revamped approach is launched early in 2012/13. The delay is to allow further consultation with representative bodies on the implementation of the recommendations in the review and on some details of the new approach.

HMRC’s Director of Local Compliance, Richard Summersgill, said:

‘Four out of ten businesses had an issue with their business records, and of those that required a follow-up visit, we found that some 90% subsequently improved their record-keeping.’

‘However, after reviewing the pilot programme and listening to the views of businesses and representative bodies, we acknowledge the need for a fresh approach to business records checks.’

Internet link: News Release

Pay up on time

A new guide ‘Get Paid!’ has been published. The guide which is aimed at smaller businesses contains tips and advice from both suppliers and customers. The guide covers advice on invoicing and developing a robust credit policy.

The government is asking businesses and public organisations to pay suppliers on time and for small businesses to pursue those who put them at risk by delaying payment.

Prompt payment is vital for SMEs, with many businesses not able to survive the cashflow problems that late payments create.

The government is encouraging SMEs to:

  • proactively agree payment terms before delivering orders.
  • sign up to the government’s Prompt Payment Code, run by the Institute for Credit Management
  • raise complaints over late payment from Code signatories and use legislation already in place to help companies pursue late payers
  • use electronic invoicing where possible.

Internet links: BIS press release Get Paid guide

HMRC latest targets

HMRC have announced that they will turn their attention to those involved in home improvement trades and direct selling (online market sellers) in their next round of Tax Catch Up Plans.

HMRC have previously offered Tax Catch Up Plans to Plumbers, Dentists and Tutors amongst others. According to the press release their latest campaigns will target:

‘Missing returns. This will contribute to wider HMRC activity tackling failure to complete tax returns. It will initially focus on those who fail to complete tax returns and who are liable to pay tax at the highest rates.’

‘Home improvement trades. This will build on campaigns aimed at plumbers and electricians, and will include several 100,000 tradespeople in construction and building work such as roofing, window fitting, bricklaying, carpentry and joinery.’

‘Direct selling. This will target customers who ought to be paying tax on income they earn from buying and selling goods direct to others, or from the commission on these sales.’

‘As with previous campaigns, the focus of the new campaigns will be on providing those in the selected groups, who may not be paying the tax they owe, a chance to put their affairs in order on the best possible terms.’

HMRC have announced that they will be using new technology to identify traders in both sectors with unpaid taxes.

Marian Wilson of HMRC said:

‘We are offering all the people targeted the opportunity to come forward. Penalties will be higher if we come and find people after the opportunity.’

Please do get in touch if you have any concerns in these areas.

Internet links: News release HMRC website

Clean up your payroll data

HMRC have launched a new online video to help employers reduce the problems caused by inaccurate employee data.

Every year HMRC receive thousands of employer returns which contain the details of millions of employees, including their names, dates of birth and National Insurance numbers. HMRC are keen to point out that whilst the vast majority of the employee data is correct, in some cases dummy, incomplete or incorrect information is included. According to the press release:

‘…a recent study of employer returns found that 128 staff were entered as Mr, Ms or Mrs Dummy, while 824 employees had the surname ‘Unknown’.’

‘Another 40 employees, according to their dates of birth, were aged over 200.’

The short YouTube video discusses how inaccurate employer returns can affect employees, employers and HMRC and offers advice on how employers can help reduce errors.

Jim Harra, HMRC’s Director of Customer Operations, said:

‘It’s really important that employers get their employees’ information right, so that HMRC can match it to the right tax records. Otherwise, it can lead to more contact from staff, trying to sort out their tax, and from HMRC, trying to sort out the data issues.’

‘So, if you’ve got a spare few minutes, watch the video and see what you can do to help your organisation get things right, for you, your employees and HMRC.’

If you would like any help with payroll issues please do get in touch.

Internet links: Press release Video

Self Assessment statistics

According to HMRC a record 9.45 million self assessment tax returns were filed on time this year and a record 7.65 million (80.9% of them) were filed online.

Although the 31 January 2012 deadline was unchanged, HMRC announced that no penalties would be issued for online returns received by midnight on 2 February, due to industrial action at HMRC contact centres.

The busiest day for online returns was 31 January, when HMRC received nearly 445,000 returns. Apparently the ‘rush hour’ occurred between 4pm and 5pm on 31 January, when 37,460 returns (more than one every 6 seconds) were received by HMRC.

David Gauke, Exchequer Secretary to the Treasury, said:

‘I’m delighted so many people filed their tax returns online this year. The record number proves that it’s quick, easy and secure to do.’

‘HMRC have always been clear that they want returns not penalties, so it is good news that over 90% of all returns were submitted on time.’

If you have not yet completed your self assessment tax return and would like some help please do get in touch.

Internet link: Press release

Budget for growth

The CBI is calling for a Budget to help businesses. To read more information on the CBI’s recommendations visit the link below.

‘The CBI called on the Chancellor to use his March Budget to score the growth and investment policy goals he put forward in his Autumn Statement and give the UK economy and jobs a real boost.’

‘In its submission to the 2012 Budget, the CBI also urged changes to the UK tax system which it believes could help persuade businesses to invest in the UK and further stimulate growth.’

The Chancellor will present his Budget on Wednesday 21 March 2012. We will update you with significant announcements.

Internet link: CBI

Penalties for failing to file payroll forms online

HMRC have confirmed in the latest Employer Bulletin that they intend to impose penalties on all employers who fail to send their payroll starter and leaver forms online from April 2012.

During the 2011/12 tax year HMRC issued penalty notices to employers with 50 or more employees when they submitted more than two paper forms in a quarter. The penalties issued ranged from £100 to £3000 depending on the number of paper forms received in the quarter.

Since April 2011 small employers (with 50 or less employees) have been required to file their in year starter (P46) and leaver (P45) forms online. However, small employers who submitted paper forms between 6 April 2011 and 5 January 2012 were only issued with warning letters. This action was taken to try and help small employers to get this right.

From 6 April 2012 penalties will be issued when the employer fails to file their starter and leaver forms online in the period 6 January 2012 to 5 April 2012 and onwards.

If you would like any help with payroll issues please do get in touch.

Internet link: Employer Bulletin

Rates and Allowances – 2012/2013

Income Tax rates and allowances

 
Income Tax allowances 2010-11 2011-12 2012-13
Personal Allowance (1) £6,475 £7,475 £8,105
Income limit for Personal Allowance £100,000 £100,000 £100,000
Personal Allowance for people aged 65-74 (1)(2) £9,490 £9,940 £10,500
Personal Allowance for people aged 75 and over (1)(2) £9,640 £10,090 £10,660
Married Couple’s Allowance (born before 6th April 1935 and aged 75 and over) (2) (3) £6,965 £7,295 £7,705
Income limit for age-related allowances £22,900 £24,000 £25,400
Minimum amount of Married Couple’s Allowance £2,670 £2,800 £2,960
Blind Person’s Allowance £1,890 £1,980 £2,100
  1. From the 2010-11 tax year the Personal Allowance reduces where the income is above £100, 000 – by £1 for every £2 of income above the £100,000 limit. This reduction applies irrespective of age.
  2. 2. These allowances reduce where the income is above the income limit for age-related allowances by £1 for every £2 of income above the limit. For the 2010-11 tax year the Personal Allowance for people aged 65 to 74 and 75 and over can be reduced below the basic Personal Allowance where the income is above £100,000.
  3. Tax relief for the Married Couple’s Allowance is given at the rate of 10 per cent.

 

Income Tax rates and taxable bands

 
Rate 2010-11 2011-12 2012-13
Starting rate for savings: 10%* £0-£2,440 £0-£2,560 £0-£2,710
Basic rate: 20% £0-£37,400 £0-£35,000 £0-£34,370
Higher rate: 40% £37,401-£150,000 £35,001-£150,000 £34,371-£150,000
Additional rate: 50% Over £150,000 Over £150,000 Over £150,000

* The 10 per cent starting rate applies to savings income only. If your non-savings income is above this limit then the 10 per cent starting rate for savings will not apply.

The rates available for dividends are the 10 per cent ordinary rate, the 32.5 per cent dividend upper rate and the dividend additional rate of 42.5 per cent.

More useful links

Find out more about Income Tax

Introduction to tax allowances and reliefs

 

National Insurance Contributions

 
£ per week 2010-11 2011-12 2012-13
Lower earnings limit, primary Class 1 £97 £102 £107
Upper earnings limit, primary Class 1 £844 £817 £817
Upper accrual point £770 £770 £770
Primary threshold £110 £139 £146
Secondary threshold £110 £136 £144
Employees’ primary Class 1 rate between primary threshold and upper earnings limit 11% 12% 12%
Employees’ primary Class 1 rate above upper earnings limit 1% 2% 2%
Class 1A rate on employer provided benefits (1) 12.8% 13.8% 13.8%
Employees’ contracted-out rebate (for contracted-out salary related schemes only) 1.6% 1.6% 1.4%
Married women’s reduced rate between primary threshold and upper earnings limit 4.85% 5.85% 5.85%
Married women’s rate above upper earnings limit 1% 2% 2%
Employers’ secondary Class 1 rate above secondary threshold 12.8% 13.8% 13.8%
Employers’ contracted-out rebate, salary-related schemes 3.7% 3.7% 3.4%
Employers’ contracted-out rebate, money-purchase schemes 1.4% 1.4% Abolished from 6 April 2012
Class 2 rate £2.40 £2.50 £2.65
Class 2 small earnings exception £5,075 per year £5,315 per year £5,595 per year
Special Class 2 rate for share fishermen £3.05 £3.15 £3.30
Special Class 2 rate for volunteer development workers £4.85 £5.10 £5.35
Class 3 rate £12.05 £12.60 £13.25
Class 4 lower profits limit £5,715 per year £7,225 per year £7,605 per year
Class 4 upper profits limit £43,875 per year £42,475 per year £42,475 per year
Class 4 rate between lower profits limit and upper profits limit 8% 9% 9%
Class 4 rate above upper profits limit 1% 2% 2%
Additional primary Class 1 percentage rate on deferred employments 1% 2% 2%
Additional Class 4 percentage rate where deferment has been granted 1% 2% 2%
  1. Class 1A NICs are payable in July and are calculated on the value of taxable benefits provided in the previous tax year, using the secondary Class 1 percentage rate appropriate to that tax year.

National Insurance for individuals

Find out about National Insurance and which rates apply to you by following the link below.

National Insurance: the basics

 

Corporation Tax rates

Rates for financial years starting on 1 April
Rate 2010 2011 2012 2013
Small Profits Rate* 21%* 20%* 20%*
Small Profits Rate can be claimed by qualifying companies with profits at a rate not exceeding £300,000 £300,000 £300,000
Marginal Relief Lower Limit £300,000 £300,000 £300,000
Marginal Relief Upper Limit £1,500,000 £1,500,000 £1,500,000
Standard fraction 7/400 3/200 1/80
Main rate of Corporation Tax* 28%* 26%* 25%* 24%*
Special rate for unit trusts and open-ended investment companies 20% 20% 20%

Marginal Relief changes from 1 April 2010

From 1 April 2010 onwards, the terminology used to describe some Corporation Tax rates and reliefs changed. This table reflects the new terminology but for ease the changes are shown below:

  • Small Profits Rate – previously Small Companies’ Rate
  • Marginal Relief – previously Marginal Small Companies’ Relief
  • Standard fraction – previously Marginal Small Companies’ Relief fraction
  • Ring fence fraction – previously Marginal Small Companies’ Relief fraction (ring fence profits)

The main rate of Corporation Tax applies when profits (including ring fence profits) are at a rate exceeding £1,500,000, or where there is no claim to another rate, or where another rate does not apply.

Ring fence companies

*For companies with ring fence profits (income and gains from oil extraction activities or oil rights in the UK and UK Continental Shelf) these rates differ. The Small Profits Rate of tax on those profits is 19 per cent and the ring fence fraction is 11/400 for financial years starting 1 April 2010, 2011 and 2012. The main rate is 30 per cent for financial years starting on 1 April 2010, 2011 and 2012.

Corporation Tax on chargeable gains

Indexation Allowance allows for the effects of inflation when calculating the chargeable gains of companies or organisations.

Corporation Tax on chargeable gains: Indexation Allowance

 

Capital Gains Tax rates and annual tax-free allowances

Each tax year nearly everyone who is liable to Capital Gains Tax gets an annual tax-free allowance – known as the ‘Annual Exempt Amount’. You only pay Capital Gains Tax if your overall gains for the tax year (after deducting any losses and applying any reliefs) are above this amount.

Tax-free allowances for Capital Gains Tax

The annual tax-free allowance (known as the Annual Exempt Amount) allows you to make a certain amount of gains each year before you have to pay tax.

Nearly everyone who is liable to Capital Gains Tax gets this tax-free allowance.

There’s one Annual Exempt Amount for:

  • most individuals who live in the UK
  • executors or personal representatives of a deceased person’s estate
  • trustees for disabled people

Most other trustees get a lower Annual Exempt Amount.

Annual Exempt Amounts
Customer group 2009-10 2010-11 2011-12
Individuals, personal representatives and trustees for disabled people £10,100 £10,100 £10,600
Other trustees £5,050 £5,050 £5,300

Gains arising after 22 June 2010 may be charged at different rates. You can use your Annual Exempt Amount against the gains charged at the highest rates to minimise the tax you owe. See the section on ‘Rates for Capital Gains Tax’ below for an example.

Executors and personal representatives

If you’re acting as an executor or personal representative for a deceased person’s estate, you may get the full Annual Exempt Amount during the ‘administration period’. The administration period is usually the time it takes to settle the deceased person’s affairs and get a grant of probate (or confirmation in Scotland).

You’re entitled to the Annual Exempt Amount for the tax year in which the death occurred and the following two tax years. After that there’s no tax-free allowance against gains during the administration period.

Find out more about death, inheritance and Capital Gains Tax

Trustees for disabled people

If you’re acting as a trustee for a disabled person you use the higher Annual Exempt Amount above – and not the rate for ‘other trustees’.

A disabled person in this context is a person who has mental health problems or receives the middle or higher rate of Attendance Allowance or Disability Living Allowance.

Find out more about Capital Gains Tax and trusts

People who are ‘non-domiciled’ in the UK

You won’t get the Annual Exempt Amount if you’re ‘non-domiciled’ in the UK and you’ve claimed the ‘remittance basis’ of taxation on your foreign income and gains.

You may be ‘non-domiciled’ in the UK, for example, if you were born in another country and intend to return there.

You may have claimed the ‘remittance basis’ if you have income and gains from abroad and have decided that it’s beneficial to be taxed on the foreign income and gains that you bring into the UK, rather than on all income and gains that arise.

Issues of domicile and tax on foreign gains are complicated. A lot depends on the facts of each case. You can find out more by following the link below. Or speak to your Tax Office about your specific circumstances.

Download guidance on ‘residency’, ‘domicile’ and the ‘remittance basis’ (PDF 560K)

Telephone or write to HMRC

Rates for Capital Gains Tax

2010-11 and 2011-12

For gains on or before 22 June 2010, Capital Gains Tax is charged at a flat rate of 18 per cent.

The following Capital Gains Tax rates apply to gains after this date:

  • 18 per cent and 28 per cent tax rates for individuals (the tax rate you use depends on the total amount of your taxable income, so you need to work this out first )
  • 28 per cent for trustees or for personal representatives of someone who has died
  • 10 per cent for gains qualifying for Entrepreneurs’ Relief

If you’re not sure how to work out your taxable income, see the examples in the section below ‘Working out your Capital Gains Tax for 2010-11’.

Find out more about Entrepreneurs’ Relief

2009-10 and 2008-09

Capital Gains Tax is charged at a flat rate of 18 per cent

2007-08

For individuals Capital Gains Tax is charged at variable rates (10 per cent, 20 per cent and 40 per cent) based on the total amount of your income and gains. For trustees or personal representatives of someone who has died there is a single rate of 40 per cent.

Find out more about working out 2007-08 rates

Working out your Capital Gains Tax for 2010-11

Gains before 23 June 2010

For gains on or before 22 June 2010, Capital Gains Tax is charged at a flat rate of 18 per cent.

Gains on or after 23 June 2010

For gains on or before 22 June 2010, Capital Gains Tax is charged at a flat rate of 18 per cent.

For gains on or after 23 June 2010, individuals need to work out their total taxable income before working out which Capital Gains Tax rate to use.

  1. First work out your taxable income by deducting any tax-free allowances and reliefs that you are entitled to.
  2. Next see how much of your basic rate band is already being used against your taxable income. The basic rate band for 2010-11 is £37,400.
  3. Allocate any remaining basic rate band first against gains that qualify for Entrepreneurs’ Relief – these are charged at 10 per cent.
  4. Next allocate any remaining basic rate band against your other gains, these are charged at 18 per cent.
  5. Any remaining gains above the basic rate band are charged at 28 per cent.

Using your Annual Exempt Amount

If you have gains which are charged at different rates, you need to decide how to use your Annual Exempt Amount. You use it against the gains charged at the highest rates to minimise the tax you owe.

Find out more about Income Tax bands and rates

Example one – a simple example

Mr P’s total income, after deducting allowances and reliefs, is £20,000 and his capital gains, after reliefs, are £15,000.

The basic rate band is £37,400. Mr P has used £20,000 of this amount against his income – so has £17,400 remaining.

As his gains are only £15,000, he has enough of the basic rate band remaining to cover his gains, so they are all to be taxed at 18 per cent. He now deducts his tax-free allowance of £10,100 and pays Capital Gains Tax at 18 per cent on £4,900.

Example two – Annual Exempt Amount

Miss W’s total income, after deducting allowances and reliefs is £60,000. In May 2010 she made a first gain of £5,000. This is taxable at 18 per cent. Her second gain in February 2011 of £12,100 is taxable at 28 per cent.

Miss W uses her Annual Exempt Amount of £10,100 against the second gain after 22 June 2010 and pays tax on the remaining £2,000 at 28 per cent. She pays tax at 18 per cent on the first gain of £5,000 before 23 June 2010.

Example three – Entrepreneurs’ Relief

Mrs T’s total income, after deducting allowances and reliefs, is £30,000 and her capital gains, after reliefs, are £20,000. £5,000 of these gains qualify for Entrepreneurs’ Relief.

The basic rate band is £37,400. Mrs T has used £30,000 of this amount against her income – so has £7,400 remaining.

She has to allocate £5,000 against the gains that qualify for Entrepreneurs’ Relief, and pays tax on these at 10 per cent.

She allocates the remaining £2,400 basic rate band against her other gains, so these are taxed at 18 per cent.

Her tax-free allowance of £10,100 is allocated to her remaining £12,600 gains. This leaves £2,500 gains taxed at 28 per cent.

Read more about Entrepreneurs’ Relief

More useful links

Find out more about Capital Gains Tax

How to work out your gain or loss

Corporation Tax on chargeable gains for companies: Indexation Allowance

 

Inheritance Tax thresholds

The Inheritance Tax threshold (or ‘nil rate band’) is the amount up to which an estate will have no Inheritance Tax to pay.

If the estate – including any assets held in trust and gifts made within seven years of death – is more than the threshold, Inheritance Tax will be due at 40 per cent on the amount over the nil rate band.

This page shows the different thresholds in use for deaths going back to 1986.

Inheritance Tax thresholds – present day back to 18 March 1986
From To Threshold/nil rate band
6 April 2009 £325,000
6 April 2008 5 April 2009 £312,000
6 April 2007 5 April 2008 £300,000
6 April 2006 5 April 2007 £285,000
6 April 2005 5 April 2006 £275,000
6 April 2004 5 April 2005 £263,000
6 April 2003 5 April 2004 £255,000
6 April 2002 5 April 2003 £250,000
6 April 2001 5 April 2002 £242,000
6 April 2000 5 April 2001 £234,000
6 April 1999 5 April 2000 £231,000
6 April 1998 5 April 1999 £223,000
6 April 1997 5 April 1998 £215,000
6 April 1996 5 April 1997 £200,000
6 April 1995 5 April 1996 £154,000
10 March 1992 5 April 1995 £150,000
6 April 1991 9 March 1992 £140,000
6 April 1990 5 April 1991 £128,000
6 April 1989 5 April 1990 £118,000
15 March 1988 5 April 1989 £110,000
17 March 1987 14 March 1988 £90,000
18 March 1986 16 March 1987 £71,000

 

Stamp Duty Land Tax rates and thresholds

Stamp Duty Land Tax (SDLT) is charged on land and property transactions in the UK. The tax is charged at different rates and has different thresholds for different types of property and different values of transaction.

The tax rate and payment threshold can vary according to whether the property is in residential or non-residential use, and whether it is a freehold or leasehold. SDLT relief is available for certain kinds of property or transaction.

This guide provides an overview of the SDLT rates and provides links to related guidance where necessary.

SDLT rates for residential property

The table below applies for all freehold residential purchases and transfers and the premium paid for a new lease or the assignment of an existing lease. (If the property will be used for both residential and non-residential purposes the rates differ – please see the section ‘SDLT for non-residential or mixed use property’).

New leases

If the transaction involves the purchase of a new lease with a substantial rent there may be an additional SDLT charge to that shown below, based on the rent. See the next section and further table ‘SDLT on rent for new leasehold properties (residential)’ for more detail.

Residential land or property SDLT rates and thresholds

Purchase price/lease premium or transfer value SDLT rate SDLT rate for first-time buyers
Up to £125,000 Zero Zero
Over £125,000 to £250,000 1% Zero
Over £250,000 to £500,000 3% 3%
Over £500,000 to £1 million 4% 4%
Over £1 million 5% 5%

If the value is above the payment threshold, SDLT is charged at the appropriate rate on the whole of the amount paid. For example, a house bought for £130,000 (by someone who is not a first-time buyer) is charged at 1 per cent, so £1,300 must be paid in SDLT. A house bought for £350,000 is charged at 3 per cent, so SDLT of £10,500 is payable.

First time buyers

The first time buyer’s £250,000 threshold applies from 25 March 2010 up to 24 March 2012 inclusive.

£1 million threshold for wholly residential property

From 6 April 2011 SDLT on residential properties over £1 million is charged at 5%. It does not apply to non-residential or mixed-use properties.

There are some transitional arrangements for contracts which were entered into before 25 March 2010 but not completed by 6 April 2011 in most of these cases the new rate will not apply.

Read more about the amount of SDLT on £1 million properties

Properties bought in a disadvantaged area

If the property is in an area designated by the government as ‘disadvantaged’ a higher threshold of £150,000 applies for residential properties.

Disadvantaged areas – residential land or property SDLT rates and thresholds
Purchase price/lease premium or transfer value SDLT rate SDLT rate for first-time buyers
Up to £150,000 Zero Zero
Over £150,000 to £250,000 1% Zero
Over £250,000 to £500,000 3% 3%
Over £500,000 to £1 million 4% 4%
Over £1 million 5% 5%

From 25 March 2010 up to 24 March 2012, first-time buyers can claim a relief from SDLT if the amount paid for the property is under £250,000. This relief applies whether or not the property is in an area designated as disadvantaged.

Read more about Disadvantaged Areas Relief

SDLT on rent – new residential leasehold purchase

When a new residential lease has a substantial annual rent, SDLT is payable on both of the following, which are calculated separately and then added together:

  • the lease premium (purchase price) – see the table above
  • the ‘net present value’ (NPV) of the rent payable

The NPV is based on the value of the total rent over the life of the lease and can be worked out using HMRC’s online calculator (link below).

In practice SDLT only becomes payable on a fairly high rent – starting at around £4,500 a year for a 99-year lease, for example, however the exact amount depends on the length of the lease.

SDLT on rent for new leasehold properties (residential)

Net present value of rent – residential SDLT rate (includes first-time buyers)
£0 – £125,000 Zero
Over £125,000 1% of the value that exceeds £125,000

Note that a higher threshold of £175,000 applied for rents on residential only leases taken from 3 September 2008 to 31 December 2009. Follow the link below to find out more.

SDLT rates 3 Sept 2008 – 21 April 2009

Read more about calculating SDLT for leasehold purchases

Go to the SDLT lease calculator

If six or more residential properties form part of a single transaction

If six or more properties form part of a single transaction the rules, rates and thresholds for non-residential properties apply. The amounts paid for all the properties in the transaction must be added together in order to establish the rate of tax payable.

SDLT rates for non-residential or mixed use properties

Non-residential property includes:

  • commercial property such as shops or offices
  • agricultural land
  • forests
  • any other land or property which is not used as a dwelling
  • six or more residential properties bought in a single transaction

A mixed use property is one that incorporates both residential and non-residential elements.

The table below applies for freehold and leasehold non-residential and mixed use purchases and transfers

If the transaction involves the purchase of a new lease with a substantial annual rent, there may be additional SDLT charge to that shown below, based on the rent. See the later section and table for more detail.

Non-residential land or property rates and thresholds

Purchase price/lease premium or transfer value (non-residential or mixed use) SDLT rate(includes first time buyers)
Up to £150,000 – annual rent is under £1,000 Zero
Up to £150,000 – annual rent is £1,000 or more 1%
Over £150,000 to £250,000 1%
Over £250,000 to £500,000 3%
Over £500,000 4%

Note that for the above purpose the annual rent is the highest annual rent known to be payable in any year of the lease, not the net present value used to determine any tax payable on the rent as described below.

SDLT on rent – new non-residential or mixed use leasehold purchase

When a new non-residential or mixed use lease has a substantial annual rent, SDLT is payable on both of the following which are calculated separately and then added together:

  • the lease premium or purchase price – see the table above
  • the net present value of the rent payable (this is based on the value of the total rent over the life of the lease and can be worked out using HMRC’s online calculators)

SDLT on rent for new leasehold properties (non-residential or mixed use)

Net present value of rent – non-residential SDLT rate(includes first time buyers)
£0 – £150,000 Zero
Over £150,000 1% of the value that exceeds £150,000

Read more about calculating SDLT for leasehold purchases

Go to the SDLT lease calculator

Using the HMRC SDLT online calculators

HMRC has developed online calculators which work out the amount of SDLT payable on residential, non-residential and mixed transactions in land and property.

Go to HMRC’s SDLT calculators

SDLT and Stamp Duty rates before 6 April 2011

Follow the links below to check SDLT and Stamp Duty rates in earlier tax years.

SDLT rates from 25 March 2010 until 5 April 2011

SDLT rates from 1 January 2010 until 24 March 2010

SDLT rates 22 April 2009 until 31 December 2009

SDLT rates 3 September 2008 until 21 April 2009

SDLT rates from 12 March 2008 until 2 September 2008

SDLT rates from 23 March 2006 until 11 March 2008

SDLT rates from 17 March 2005 until 22 March 2006

SDLT rates from 1 December 2003 until 16 March 2005

Rates of Stamp Duty on land transfers before December 2003