If you’re looking to invest your money in a valuable asset, then property is often one of the best routes to take. Whether you invest in residential or commercial property, our team is experienced in helping clients as they navigate the various tax aspects of the process. With this in mind, this week’s Tax Tuesday looks at the two main taxes that you should be aware of when investing in property: Stamp Duty Land Tax and Annual Tax on Enveloped Dwellings.
Stamp Duty Land Tax
Stamp Duty Land Tax must be paid on the sale of property or land over a certain price in England and Northern Ireland. It applies when you:
- buy a freehold property
- buy a new or existing leasehold
- buy a property through a shared ownership scheme
- are transferred land or property in exchange for payment, for example when you take on a mortgage or buy a share in a house.
If you buy a property for less than the threshold, then you do not have to pay Stamp Duty Land Tax. The thresholds for this are:
- £250,000 for residential properties
- £150,000 for non-residential land and properties.
- £425,000 for first-time buyers buying a property worth £625,000 or less
Please note: for first-time buyers buying a property between £425,000 and £625,000, Stamp Duty Land Tax is applied at a tapered rate of 5%. This is applied on the value from £425,001 to £625,000. If the property is over £625,000, then the buyer is not eligible for any relief. There are different rates of Stamp Duty Land Tax, depending on if you’re a first-time buyer, you’re buying an additional property, or if you’re not a UK resident. Similarly, you may have to pay a different amount of Stamp Duty Land Tax, depending on whether you’re eligible for relief or exemption, or whether the land or property will be used residentially, non-residentially, or as a mixed-use property. Typically, the total value that Stamp Duty Land Tax is paid on is the price you pay for the property or land. However, it can include another type of payment, such as; goods, works or services, release from a debt, or transfer of a debt. It’s important to know that in Scotland Land and Buildings Transaction Tax applies, and in Wales it is Land Transaction Tax.
Annual Tax on Enveloped Dwellings
Annual Tax on Enveloped Dwellings (ATED) is an annual tax payable mainly by companies that own UK residential property valued at more than £500,000. You will need to complete an ATED return if your property:
- is a dwelling
- is in the UK
- was valued at more than £500,000
- is owned completely or partly by a company, partnership where any of the partners is a company, or collective investment scheme.
A dwelling is classified as property where all or part of it is used, or could be used, as a residence. This could be a house, flat, or other residence, and it includes any gardens, grounds and buildings within them. ATED returns must be submitted on or after 1 April in any chargeable period. To work out what you need to pay, you will need to value your property using a valuation date. The valuation date is the precise date that the value of an asset is determined, and it depends on when you owned the property. The amount of ATED you will need to pay is worked out by a banding system, which is based on the value of your property. Chargeable amounts for the accounting period, 1st April 2023 to 31st March 2024 are as follows:
| Property value | Annual charge |
| More than £500,000 up to £1 million | £4,150 |
| More than £1 million up to £2 million | £8,450 |
| More than £2 million up to £5 million | £28,650 |
| More than £5 million up to £10 million | £67,050 |
| More than £10 million up to £20 million | £134,550 |
| More than £20 million | £269,450 |
Chargeable amounts for the accounting period, 1st April 2022 to 31st March 2023 are as follows:
| Property value | Annual charge |
| More than £500,000 up to £1 million | £3,800 |
| More than £1 million up to £2 million | £7,700 |
| More than £2 millions up to £5 million | £26,050 |
| More than £5 million up to £10 million | £60,900 |
| More than £10 million up to £20 million | £122,250 |
| More than £20 million | £244,750 |
To submit your ATED return, you can use the online service here.
How can we help?
If you have any questions about Stamp Duty Land Tax, Annual Tax on Enveloped Dwellings, or property investment in general, please do not hesitate to get in touch with our Tax Team at tax@haroldsharp.co.uk or call 0161 905 1616.