Stamp Duties

• Topic 01

  Stamp Duties

  27 questions

A few questions from this unit, with the answer and a full explanation. The complete bank is available when you start practising.

1. What is Stamp Duty Reserve Tax (SDRT) and when does it apply?

   • A
     SDRT is a tax on electronic purchases of shares and other securities; it applies at 0.5% of the consideration when shares are transferred electronically
     Correct answer
   • B
     SDRT is the same as Stamp Duty Land Tax; both apply at 0.5% on residential property
   • C
     SDRT is a 1.5% charge on all share transfers, whether paper or electronic
   • D
     SDRT is a charge on the sale of gilts and qualifying corporate bonds at 0.5%
   Explanation

   Stamp Duty Reserve Tax (SDRT) is charged on the electronic purchase of UK shares and certain other securities. It is charged at 0.5% of the consideration (the price paid for the shares). SDRT is paid by the buyer and is settled by the stockbroker or platform as part of the transaction. It is distinct from Stamp Duty Land Tax (SDLT), which applies to land and property transactions. There is also a higher SDRT rate of 1.5% on transfers into depositary receipt schemes and clearance services.

2. What SDLT relief is available to first-time buyers in England and Northern Ireland and up to what purchase price does it apply in 2025/26?

   • A
     First-time buyers pay no SDLT on properties up to £425,000 and 5% on the portion from £425,001 to £625,000; no relief applies above £625,000
     Correct answer
   • B
     First-time buyers receive a 50% discount on the SDLT otherwise payable on any property up to £625,000
   • C
     First-time buyers pay no SDLT on properties up to £425,000 and 2% on the portion from £425,001 to £625,000
   • D
     First-time buyers pay no SDLT on properties up to £500,000 regardless of the purchase price
   Explanation

   First-time buyer SDLT relief in England and Northern Ireland: (1) No SDLT on properties up to £425,000; (2) 5% SDLT on the portion between £425,001 and £625,000; (3) If the purchase price exceeds £625,000, the standard SDLT rates apply in full (no partial relief). This relief is available only to genuine first-time buyers who intend to occupy the property as their main residence. Note: The nil-rate threshold for standard purchasers reverted to £125,000 from 1 April 2025.

3. What test determines whether the additional dwellings SDLT surcharge applies to a property purchase?

   • A
     The surcharge applies if, at the end of the day of completion, the buyer owns two or more residential properties (including the property being purchased); it applies regardless of where in the world the other property is located
     Correct answer
   • B
     The surcharge applies only to buy-to-let investors who declare rental income; it does not apply to second home purchases
   • C
     The surcharge applies if the buyer's other property has a value above the nil-rate threshold
   • D
     The surcharge applies only on new-build properties purchased as second homes
   Explanation

   The additional dwellings SDLT surcharge (5% from 31 October 2024; previously 3%) applies if the buyer owns one or more additional residential properties worldwide at the end of the day of completion. Key points: (1) It applies to any residential property anywhere in the world, not just UK property; (2) It applies to second homes, buy-to-let, and any additional residential property; (3) It does not apply if the property is replacing the buyer's only main residence (and they sell the previous home on the same day, with an 18-month window to replace it). Overseas properties are explicitly included — a common exam misconception.