Home Front: You may pay Stamp Duty on a rental property
Q: One of the clauses in the tenancy agreement for my flat mentions that Stamp Duty Land Tax may be charged to the tenant? I thought only buyers purchasing a property paid it. Can you enlighten me?
Written by Dawn Sandoval for The Wharf
A: Stamp Duty isn’t only confined to sales. Tenants in rented accommodation in the UK that pay substantial annual rental amounts, may be required to pay it too.
Many tenants are unaware of this legal obligation, which if not complied with, may result in the tenant being fined by HMRC.
Stamp Duty is due on rents that exceed £125,000, cumulatively, during tenancies and, tax for sales transactions, is charged at 1% on any amount over and above that threshold, not on the entire figure.
Since December 1, 2003, the responsibility for paying any rests solely with the tenant. For example – if the net present value of the rent under a lease was £140,000 then the amount of the net present value that’s over the £125,000 threshold would be £15,000.
Stamp Duty must be paid on this £15,000 at the rate of 1% leaving the tenant with a bill for £150.
If you ever reach – or are close to reaching – the £125,000 threshold, it is always best to contact HMRC and confirm with them the amount you need to pay, then arrange to pay it directly to them.
Please be aware that HMRC may impose fines or penalties if a tenant fails to make payment after they have exceeded the threshold.
