Stamp Duty
This tax is payable when investing in either shares or in property, and the amount payable will depend upon the value of the transaction.
STAMP DUTY ON SHARES
There are two different classes of tax payable when buying shares, the type that you will pay depends upon whether your purchase is a paperless (electronic) or paper (completed with the use of stock transfer forms) transaction.
Paper Transactions - With Stock Transfer Forms
You may need to pay Stamp Duty, as opposed to Stamp Duty Relief Tax (see below) when making the transaction. The rate of stamp duty is 0.5% and is rounded up to the nearest £5, meaning that any transaction under £1000 will always have the same Stamp Duty of £5 due. If you do not have to pay for the shares, there is no Stamp Duty due. If dealing with paper transactions, you are responsible for ensuring that the correct payment of Stamp Duty is made to HM Revenue & Customs. To calculate exactly how much is due on a transaction, you can use HMRC's Stamp Duty Online Calculator;
http://sdcalculator.inlandrevenue.gov.uk/SDShares.aspx
Paperless Transactions - Completed Online
This is the common type of transaction, and involves a slightly different variation of Stamp Duty called Stamp Duty Reserve Tax (SDRT). When using a stockbroker to buy shares, it is likely that they will complete the transaction online using the CREST system which manages share dealings between the stockbroker and the company or company's registrar. CREST will automatically deduct the cost of SDRT from any transaction value and will send the payment to HMRC on behalf of you or your stockbroker.
If you have any questions about SDRT you can phone HMRC on 0845 603 0135 between 8.30 am and 5.00 pm, Monday to Friday (closed on Bank Holidays).
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STAMP DUTY ON PROPERTY
Since December 2003, Stamp Duty has been replaced by Stamp Duty Land Tax (SDLT) which may be payable on any property purchase with a value over £125,000
Disadvantaged Relief Areas (DARs)
Certain areas in the UK have been identified as disadvantages and buying a property in any such area may mean that you are exempt from SDLT on a further £25,000 of the purchase price. This means that houses purchased for £150,000 or less will be exempt from Stamp Duty. For more information about DARs, and to see which areas qualifies, please visit the HMRC DAR page;
http://www.hmrc.gov.uk/so/dar/dar-qualifying.htm
Zero Carbon Homes
House that are built well, are insulated very well, produce a sufficient amount of energy from their own renewable resources and have been self-sustained for a year can be exempt from SDLT if the purchase price is below £500,000. Any Zero Carbon Homes with a value of over the £500,000 threshold may be entitles to a £15,000 reduction in their SDLT bill.
SDLT Rates
The latest rates, effective from March 23rd, 2006 are;
| Rate | Land in disadvantaged areas - all types |
All other land in the UK - residential |
All other land in the UK - non-residential |
| 0% | £0 - £150,000 |
£0 - £125,000 |
£0 - £150,000 |
| 1% | Over £150,000 |
Over £125,000 - £250,000 |
Over £150,000 |
| 3% | Over £250,000 - £500,000 | ||
| 4% | Over £500,000 |
||
Paying SDLT
The buyer of the property is ultimately responsible for sending the payment to HMRC, but all such admin and payments are usually handled by a Solicitor or Licensed Conveyor on the buyer's behalf. Regardless of who completes the relevant form, the buyer will have to sign a declaration, and should ensure that all information on the form is correct so that no negative impacts are experienced from the submission of incorrect data.
THE DIRECT ADVICE TAX GUIDE
Taxes for Individuals
Income Tax - National Insurance - Stamp Duty - Inheritance Tax
Taxes for Businesses