In July 2020, temporary property tax holidays were introduced for UK residential housing. The break aimed to encourage people to have confidence when buying, selling and renovating houses, and provide support for economic growth and jobs.
And while taxes returned to their previous level, changes have been introduced for England and Northern Ireland following the Chancellor of the Exchequer’s ‘mini -budget’ on 23 September 2022.
However, the difference in approaches taken across the country served to highlight how the UK landscape for property tax diverges across its four home nations, deviations often due to the devolved parliaments in Scotland and Wales.
So, while stamp duty land tax is due in England and Northern Ireland, it is the land and buildings transaction tax in Scotland, and the land transaction tax in Wales. And there are other differences buyers should be aware of, which we explain below.
What do you pay where?
England and Northern Ireland
In England and Northern Ireland, at present, no stamp duty is due on the first £250,000 of a property purchase, provided it’s your main residence and you are UK resident. That threshold, however, increases to £425,000 if you’re a first-time buyer and the property you’re buying costs £625,000 or less.
It’s also worth noting stamp duty is progressive and marginal, i.e. different percentages apply to each price band. As such, if the property you’re buying is worth between £250,001 and £925,000 the initial rate of tax is 5% of the final sale value. If that value is between £925,001 and £1,500,000, the tax paid on the ‘chunk’ above £925,001 increases to 10%. Finally, 12% is due for homes on the portion worth more than £1,500,001.
If it is a second home – i.e. you already own a home anywhere else in the world – or an investment property, collectively categorised as ‘additional properties’, you should expect to pay 3% more. A further 2% is also usually due if you are not UK resident and you spend less than 183 continual days in the UK either before or after the completion date of your property transaction. It is also worth noting that you can claim this tax back if you become UK resident within a two-year period of the completion date.
The main difference between Scotland and the other home nations is the thresholds and rates currently in place. In Scotland, first-time buyers pay no land and buildings transaction tax on the first £145,000 of a property. Then, if the property you’re buying is your main residence and is worth between £145,001 and £250,000, you’ll pay 2%. If the value is between £250,001 and £325,000, the percentage increases to 5% for that portion. It then reaches 10% for the portion of a property’s value between £325,001 and £750,000 and, again, a 12% marginal rate due on any homes worth more than £750,001.
As elsewhere, additional properties and those being bought by non-resident buyers are taxed at higher rates.
An additional complexity for those buying north of the border is that Scottish properties typically require offers over the value being advertised. Elsewhere, the value advertised is seen as a guide and offers below the asking price may be appropriate, e.g. if the property has been on the market for many months.
In Wales, the thresholds and rates are different again to those detailed above, and there is no extra relief for first-time buyers. As such, no stamp duty is due on the first £180,000 of a property. If the property you’re buying is your main residence and is worth between £180,001 and £250,000, you’ll pay 3.5% on the portion between that band. If the value is between £250,001 and £400,000, that figure increases to 5%. It then reaches 7.5% for properties worth between £400,001 and £750,000, 10% for properties worth between £750,001 and £1,500,000 and finally 12% for a home worth more than £1,500,001.
As before, additional properties are taxed at higher rates.
To summarise these for home buyers, while noting that Scotland and Wales have not made changes to their stamp duty equivalent taxes (as at the time of writing), we have put together the table below:
Payment due dates
If you’re buying in England or Northern Ireland, you have 14 days from the date of completion – the day when all the contracts are signed and dated, and you get the keys – to file the stamp duty return and pay what you owe. In Scotland and Wales, you have 30 days.
To help you understand how much you’ll pay on a property, we recommend you use the stamp duty tax calculator for England and Northern Ireland, the land and buildings transaction tax calculator for Scotland, and the land transaction tax calculator for Wales.
Meanwhile, if you are non-resident in the UK and buying a UK property to live in, you can reclaim the non-resident surcharge if you become UK resident within two years following the purchase. For those buyers who remain non-resident, it’s worth noting that any gains from UK residential property sales are subject to capital gains tax of 28%, which includes gains due to share ownership in ‘property-rich’ non-UK companies.
For those interested in learning more, it’s worth flagging that Nedbank Private Wealth doesn’t provide individual tax advice, but as a regulated mortgage provider, we work closely with legal and tax advisers. We are also able to introduce you to professional advisers if you do not have one.
As well as helping individuals and companies buy residential property in the British Isles, our award-winning wealth planning support can help you borrow for additional wealth goals, while ensuring your purchase fits with your broader financial plans.
This articles was previously published in August 2022, but updated following the announced change in stamp duty on 23 September 2022.
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