The rules regarding Stamp Duty exemption are quite complex. Many people mistakenly assume that first time buyers are exempt, but this is no longer the case, as of the 25th of March 2012. Before this date, those purchasing a property for the first time were not liable for Stamp Duty unless the value of the property reached the £250,000 threshold, rather than the £125,000 one. Therefore, first time buyers who bought a house valued at £250,000 were able to save £2,500. Whilst the abolishing of this particular exemption is disheartening news for first time buyers, there are other situations in which Stamp Duty exemption applies.
In certain circumstances, property transactions do not have to be reported on Stamp Duty Land Tax returns, and no Stamp Duty is payable; such transactions include those where no value or money has changed hands, property which has been transferred during a divorce, or when property has been left to someone in a will. In addition, the HMRC does not have to be notified of any transactions where the property in question is worth less than £40,000. However, it should be noted that if the new owner in this situation ends up taking out a mortgage of more than £40,000, and Stamp Duty Land Tax return will have to be filed, although no Stamp Duty will have to be paid if the mortgage is under £125,000.
Other situations where Stamp Duty Land Tax returns still have to be filed, but Stamp Duty exemption applies, include the following:
- When a residential property is acquired, which is located in a disadvantaged area and has a value of less than £150,000.
- When a company which builds houses, purchases an individual’s home
- When “chain-breaking” purchases are made
- When, as part of property development, a compulsory purchase is made
- For property developers that are subject to planning obligations
- When property is transferred between two companies that are within the same group
- When property is transferred to a registered charity
- When “right to buy” properties are purchased
- For all social landlords that are registered
Stamp duty exemption is also applicable to all carbon neutral properties, which provide renewable power and heat onsite and are worth £500,000. However, this exemption is for five years only – the start date of this was the 30th of September 2012. If the value of such a property exceeds £500,000, stamp duty will be payable; however the liability will be cut by £15,000.
There are certain types of shares which are exempt from Stamp Duty, for one of two reasons; either due to a specific exemption being applicable, or because no consideration is given for the shares. Some examples of the latter include shares which are held in a trust that one trustee transfers to another, shares that are transferred by a civil partner or spouse, or shares which are received as a gift.