BUYING AND SELLING REAL ESTATE IN ENGLAND AND WALES 123
o Various reliefs may apply. These are complex and outside the scope of this guide. o With regard to leases, a 1% rate of SDLT will be due on the net present value of the rent, above £250,000 (residential) or £150,000 (non- residential/mixed), which is calculated using a formula that considers various factors, including the fact that rents to be received in the future have a lower value than rents received immediately. o For commercial leases, where the net present value exceeds £5m, the rate of SDLT for the proportion of the net present value above £5m is 2% rather than 1% o A 15% SDLT rate applies to the entire purchase price when residential real estate costing more than £500,000 is acquired by certain “non -natural persons” ( NNP s). These include companies and partnerships with a corporate partner but not trustees. Relief from the 15% charge (with the effect that the normal rates apply) may be claimed by NNPs carrying on real estate development or using real estate for commercial renting to third parties. Conditions apply. • In Wales, land transaction tax ( LTT ) is payable instead of SDLT. The two taxes (and the reliefs that apply) are broadly similar but there are some technical differences and also differences in the rates of tax that apply: o For commercial real estate, the
the next £750,000 and 6% on the remaining amount. o For residential real estate, the rates are 0% on the first £225,000 of the purchase price, 6% on the next £175,000, 7.5% on the next £350,000; 10% on the next £750,000 and 12% on the remaining amount. Purchases of additional residential real estate (or purchases of residential real estate by companies) attract higher rates up to a maximum of 16% on any portion of the purchase price that exceeds £1.5m. There is no first-time buyer’s relief in Wales. o With regard to commercial (but not residential) leases, a 1% rate of LTT is applied to the net present value of the rent above £225,000. Where the net present value exceeds £2m, the rate of LTT for the proportion of the net present value above £2m is 2% rather than 1%. o Unlike in England, NNPs of residential real estate do not pay an enhanced rate of LTT.
• Annual Tax on Enveloped Dwellings ( ATED ) came into effect on 1 April 2013 and is currently payable only in respect of residential properties owned by NNPs worth in excess of £500,000 on 1 April 2012 (or at acquisition if later). From ATED tax year 2023/24, the valuation date changed to 1 April 2022 for properties held on that date. ATED is an annual charge of up to £287,500 per year (as at ATED tax year 2024/25), calculated by reference to real estate value bands.
rate of tax is 0% on the first £225,000 of the purchase price, 1% on the next £25,000, 5% on
ILN Real Estate Group – Buying and Selling Real Estate Series
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