Everything you need to know about stamp duty on your property with Pfida
It can be confusing when trying to calculate the Stamp Duty Land Tax (SDLT) applicable to your property purchase, so we’ve put together a collection of questions we get asked regularly to help break it down for you.
Is Stamp Duty Land Tax (SDLT) shared between Pfida and me?
Each party pays their respective SDLT amount.
To understand this, it’s important to first understand the ownership model. The property is first purchased by our special purpose company, Pfida Finance PLC (the PLC), and it pays SDLT upon transfer of the title to it. Later, once you purchase the property and take ownership of the title, you will need to pay SDLT.
With us it is more like buying a property that you have been renting from your landlord. The landlord initially buys the property, and pays their SDLT. Later, if you offer to purchase the property from the landlord, you will be responsible for SDLT at that point. In this example, think of the PLC like a landlord.
Note that, just like with any other landlord, you do not have to purchase the property from us if you do not want to. However, if you do wish to purchase it from us, we are here to help.
How is my Stamp Duty Land Tax (SDLT) calculated?
With Pfida’s home finance solution, SDLT is paid by our special purpose company Pfida Finance PLC (the PLC) when the property is purchased. The PLC pays the corporate rate of SDLT.
The SDLT paid is then added to the purchase price, and the combined sum forms your acquisition price – this is the price at which you would normally purchase the property from the PLC, in line with our policy.
You will need to pay your SDLT when the title of the property is transferred to you at the end of our agreement.
For example, if a property is purchased for £100,000, and the PLC pays SDLT of £3,000, when you decide to purchase the property, our policy is to sell it to you at the acquisition cost (£103,000).
The way to think about this is to consider the scenario of buying a property you have been renting from your landlord. When the landlord purchased the property initially, they took on the ownership, risks and responsibilities of the property and paid SDLT. If you offer to purchase the property from your landlord, they will charge you market price and then you will pay SDLT on the purchase, making use of any reliefs that may be available at that time.
For example, the landlord purchased the property 30 years ago for £100,000 and paid £3,000 SDLT. 30 years later it is now worth £400,000, so that is the price they sell it to you for and your SDLT is calculated on £400,000. With our product it is the same; however instead of selling the property to you at the current market price of £400,000 in the example above, our usual policy is to only charge you the acquisition price of £103,000, and SDLT will be applied on this amount. any upside in the property in excess of what we charge, is yours to keep.
Am I entitled to use my first-time buyer’s Stamp Duty Land Tax (SDLT) relief?
Please note, the information provided below is for guidance only and should not be construed as tax advice. You should affirm your own tax situation with a tax advisor and should not rely on the below when making tax planning decisions.
When you purchase the property from us, you will be liable to pay SDLT subject to the law prevailing at the time.
Depending on the rules and regulations at that time, it is possible you may not at that stage qualify for first time buyer’s relief, due to your leasehold interest in the property. However, you should seek professional advice from a suitably qualified tax advisor to ascertain your position in relation to SDLT and your entitlement to any relief available now or later.
You can find out information on SDLT tax relief and thresholds on the government website here.
This information is accurate at the time this FAQ was written (24th July 2023.)