If you’re an investor thinking about buying a property, stamp duty comes hand in hand with the purchase of any buy to let residential asset over £40,000. The talked-about tax isn’t ideal for investors, but it’s mandatory, so don’t let it put you off opting for one of the UK’s most lucrative investment industries. As long as you know how and where to pay the Stamp Duty Land Tax (SDLT) due on your investment, it’s much less difficult than you might assume.
Once you know how much of the tax you’ll be liable to pay, it’s important to understand how the process works when it comes to actually paying. Firms like RWinvest have developed a simple but effective Stamp Duty Calculator that allows you to work out how much stamp duty you will have to pay on your chosen property in the click of a button, and now, HM Revenues and Customs have set out a clear guide to paying the tax on time.
Firstly, any SDLT payments need to be paid within 30 days of completion of the property, otherwise known as the transaction date. This is when all relevant contracts have been signed and the investor can take full possession of the property. This could also be due at an earlier point where a minimum of 90% of the payment of exchange has been made. Whenever your completion date is, the full amount of funds must reach HMRC on the final working day prior to the 30thday deadline, meaning you’ll have to watch out for bank holidays.
In order to declare your stamp duty payment, you’ll have to complete a stamp duty tax form which must be sent to HMRC by the end of the 30-day period. This is applicable even if you are exempt from stamp duty for whatever reason, as it’s still required by HMRC to submit a stamp duty return. Failure to pay stamp duty in time could result in spiked interest rates and steep penalties which investors should aim to avoid at all costs.
Thankfully, swift internet systems and online card payments mean that stamp duty can be paid and processed within the space of a day to make for a seamless stamp duty experience. However, alternative payment methods such as cheque and BACS may take a little longer, so ensure that you take this into account when factoring in your payment schedule. A full breakdown of the various payment options with more information about the procedure for individual payment possibilities is available on the HMRC website for your perusal.
If you’re working with a solicitor, agent or conveyancer through your buy to let investment, the stamp duty formula becomes even less complicated. Taking away the stress from investors, they tend to file the necessary return form to HMRC and pay the stamp duty on your behalf, simply adding it into their fees which you can pay as and when required.
Please note that stamp duty land tax should not be confused with a tax paid on the purchase of paperless shares – also known as stamp duty reserve tax, or with stamp duty on shares which are bought on a stock transfer form. Additionally, if you’re buying in England, be sure to keep away from Scotland’s Land and Buildings Transaction Tax rules and Wales’ Land Transaction Tax which both have different payment structures.
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