Can stamp duty land tax be paid from capital gains tax?

Posted 24th July 2023 by ctatax-admin

Cornerstone Tax is the UK’s leading property tax advisers, specialising in Stamp Duty Land Tax. We’ve reclaimed over £15 million in overpaid SDLT in the last 12 months. Contact us for stamp duty advice, or to see if you are eligible to claim a refund from HMRC on overpaid Stamp Duty.

Introduction

Stamp Duty Land Tax (SDLT) is a significant expense that homebuyers in England and Northern Ireland must consider when purchasing a property. On the other hand, Capital Gains Tax (CGT) is a tax levied on the profit made from the sale of certain assets. Given the connection between property transactions and capital gains, a common question arises: Is it possible to use Capital Gains Tax to pay for Stamp Duty Land Tax? In this blog post, we will explore the relationship between SDLT and CGT and discuss whether they can be interchanged.

Understanding Stamp Duty Land Tax (SDLT) and Capital Gains Tax (CGT)

SDLT is a tax imposed by the UK government on property transactions exceeding certain thresholds. It is calculated based on the purchase price of the property. SDLT is typically paid by the buyer within 14 days of the completion of the transaction.

Read: How to tell if you’ve overpaid on stamp duty land tax – how to claim it back

CGT, on the other hand, is a tax applied to the profit made from the sale of assets, including property. When a property is sold, CGT is calculated by determining the difference between the purchase price (or the value at the time of acquisition) and the sale price.

The relationship between SDLT and CGT

SDLT and CGT are distinct taxes with different purposes. SDLT is a transaction-based tax that is payable when buying a property, while CGT is levied on the profit made from selling an asset, including property. As such, SDLT and CGT serve different fiscal purposes and are not interchangeable in terms of payment.

Paying SDLT with CGT

Currently, there is no provision allowing the direct payment of SDLT using CGT. The two taxes are separate liabilities and are paid independently based on their respective rules and calculations.

Potential Implications and Alternatives

1. Timing of Payments: SDLT is typically paid upfront within 14 days of the property transaction completion, while CGT is typically paid when the property is sold and the capital gain is realised. As such, the timing of these tax payments differs.

2. Utilizing Capital Gains: While SDLT cannot be directly paid from CGT, property owners may consider utilising any capital gains they receive from the sale of other assets to help cover the cost of SDLT. This approach may provide additional funds to meet SDLT obligations, but it does not equate to direct payment from CGT.

Read: How long does a stamp duty refund take?

3. Seek Professional Advice: It is crucial to consult with tax professionals, such as accountants or tax advisors, who can provide personalised guidance on managing SDLT and CGT liabilities. They can help analyse individual circumstances and develop tax strategies to optimise tax planning and obligations.

Conclusion

While SDLT and CGT both pertain to property transactions and taxes, they serve different purposes and are not interchangeable when it comes to payment. SDLT is a tax payable at the time of property purchase, whereas CGT is paid when a property is sold and a capital gain is realised. As of now, there is no provision allowing the direct payment of SDLT using CGT. It is important to understand the distinctions between these taxes and seek professional advice to ensure compliance with tax regulations and to optimise tax planning strategies for both SDLT and CGT liabilities.

Cornerstone Tax is the UK’s leading property tax advisers, specialising in Stamp Duty Land Tax. We’ve reclaimed over £15 million in overpaid SDLT in the last 12 months. Contact us for stamp duty advice, or to see if you are eligible to claim a refund from HMRC on overpaid Stamp Duty.