Stamp Duty Land Tax

Who pays the tax?

SDLT is payable by the pur­chas­er in a land trans­ac­tion occur­ring in Eng­land and North­ern Ire­land. For land trans­ac­tions occur­ring in Scot­land, Land & Build­ings Trans­ac­tion Tax (LBTT) applies and in Wales land trans­ac­tions are charge­able to Land Trans­ac­tion Tax (LTT).

What is a land transaction?

A trans­ac­tion will trig­ger lia­bil­i­ty if it involves the acqui­si­tion of an inter­est in land. This will include a sim­ple con­veyance of land such as buy­ing a house, cre­at­ing a lease or assign­ing a lease.

What is the tax charged on?

Tax is charge­able on the con­sid­er­a­tion. This will usu­al­ly be the actu­al cash that pass­es on the sale. How­ev­er the def­i­n­i­tion is very wide and is intend­ed to catch all sorts of sit­u­a­tions where val­ue might be giv­en oth­er than in cash: for exam­ple, if the pur­chas­er agrees to do cer­tain work on the prop­er­ty.

When is the tax payable?

The tax has to be paid when a con­tract has been sub­stan­tial­ly per­formed. In cas­es where the pur­chas­er takes pos­ses­sion of the prop­er­ty on com­ple­tion, that will be the date. How­ev­er, if the pur­chas­er effec­tive­ly takes pos­ses­sion before com­ple­tion — known as ‘rest­ing on con­tract’ — that will be regard­ed as trig­ger­ing the tax.

How much tax is payable on residential property?

Each SDLT rate is payable on the por­tion of the prop­er­ty val­ue which falls with­in each band.

SDLT rates

The cur­rent rates are as fol­lows:

First-time buyer relief

First-time buy­ers may be eli­gi­ble for first-time buy­er relief on pur­chas­es of res­i­den­tial prop­er­ty up to £500,000. The rates apply to the por­tion of the total val­ue which falls with­in each band.

Each SDLT rate is payable on the por­tion of the prop­er­ty val­ue which falls with­in each band. The rates and thresh­olds are:

No relief can be claimed if the prop­er­ty is over £500,000 and the nor­mal SDLT rates will apply to the full amount of con­sid­er­a­tion.

Additional residential properties

High­er rates of SDLT are charged on pur­chas­es of addi­tion­al res­i­den­tial prop­er­ties (above £40,000).

The main tar­get of the high­er rates is pur­chas­es of buy to let prop­er­ties or sec­ond homes. How­ev­er, there will be some pur­chasers who will have to pay the addi­tion­al charge even though the prop­er­ty pur­chased will not be a buy to let or a sec­ond home. The 36-month rule set out below helps to remove some trans­ac­tions from the addi­tion­al rates (or allow a refund).

The high­er rates are 5% above the SDLT rates shown in the table above. The high­er rates poten­tial­ly apply if, at the end of the day of the pur­chase trans­ac­tion, the indi­vid­ual owns two or more res­i­den­tial prop­er­ties.

Some fur­ther detail:

• Pur­chasers will have 36 months to claim a refund of the high­er rates if they buy a new main res­i­dence before dis­pos­ing of their pre­vi­ous main res­i­dence
• Pur­chasers will also have 36 months between sell­ing a main res­i­dence and replac­ing it with anoth­er main res­i­dence with­out hav­ing to pay the high­er rates
• A small share in a prop­er­ty which has been inher­it­ed with­in the 36 months pri­or to a trans­ac­tion will not be con­sid­ered as an addi­tion­al prop­er­ty when apply­ing the high­er rates
• There will be no exemp­tion from the high­er rates for sig­nif­i­cant investors.

SDLT surcharge on non-UK residents

There is a 2% SDLT sur­charge on non-UK res­i­dents (and cer­tain UK res­i­dent com­pa­nies that are con­trolled by non-UK res­i­dents) pur­chas­ing res­i­den­tial prop­er­ty in Eng­land and North­ern Ire­land.

What about non-residential and mixed property?

The rates for non-res­i­den­tial and mixed prop­er­ty are set out in the table below.

The SDLT rates are payable on the por­tion of the prop­er­ty val­ue which falls with­in each band.

Are there any exemptions?

Yes. There are a num­ber of sit­u­a­tions in which the trans­fer of land will not be caught for SDLT. No SDLT will be payable and no return will be due. These include:

• the val­ue of the free­hold is less than £40,000
• a licence to occu­py
• a gift of land
• trans­fers of land in a divorce or on death
• trans­fer of land to a char­i­ty
• trans­fers of land with­in a group of com­pa­nies where an SDLT group relief claim is made.

How does the tax work on leases?

The SDLT payable on the pur­chase of a lease depends on whether the lease is new or exist­ing (an assigned lease).

Where a new lease is pur­chased the SDLT payable will be cal­cu­lat­ed on the val­ue of the pre­mi­um (upfront lump sum pay­ment). If any­thing more than a nom­i­nal rent is payable, SDLT will also be payable on the net present val­ue (NPV) of the rent over the term of the lease. The pre­mi­um and the NPV are treat­ed as two sep­a­rate amounts. If the cal­cu­lat­ed val­ue of either exceeds £250,000 for res­i­den­tial prop­er­ty and £150,000 for non-res­i­den­tial, the excess is charged SDLT at the nor­mal rates.

An SDLT return will be due where the pre­mi­um is £40,000 or more, even if no SDLT is due, unless the term of the lease is less than sev­en years.

If an exist­ing lease is pur­chased, SDLT is cal­cu­lat­ed in the same way as the pur­chase of a free­hold prop­er­ty. The amount of the pre­mi­um is the con­sid­er­a­tion sub­ject to SDLT and is also cal­cu­lat­ed in the same way as the pur­chase of a free­hold prop­er­ty.

The gov­ern­ment has SDLT cal­cu­la­tors which work out the amount of SDLT payable. The cal­cu­la­tors can be found at www.gov.uk/stamp-duty-land-tax-calculators.

How do I tell HMRC about a liability?

The pur­chas­er must com­plete an SDLT1 return and this must be sub­mit­ted to the rel­e­vant HMRC office with­in 14 days of the trans­ac­tion’s effec­tive date. Solic­i­tors and con­veyancers can sub­mit the return online on your behalf. Oth­er­wise, a paper return must be used. Pay­ment must be made at the same time. A late return trig­gers an auto­mat­ic penal­ty of £100, and late pay­ment of the tax will mean a charge to inter­est.

What will HMRC do then?

A cer­tifi­cate will be sent to the pur­chas­er to show that they have paid the tax. This cer­tifi­cate is required to change the details of the prop­er­ty own­er­ship at the Land Reg­istry. The fact that HMRC has giv­en the pur­chas­er a cer­tifi­cate does not mean the SDLT cal­cu­la­tions are agreed. HMRC has nine months in which to decide whether or not to enquire into the return and chal­lenge the fig­ures.