Stamp Duty Land Tax (SDLT) is a tax charged on land transactions. The tax is payable on the purchase or transfer of chargeable interest. In other words, on freehold and leasehold interests in land in the UK.
The amount paid for the purchase or transfer of land in the UK, will determine whether SDLT is payable. The amount paid must be over the following thresholds:
- £125,000 for residential properties
- £150,000 for commercial properties
- £40,000 if buying a second home
How much SDLT will have I to pay?
SDLT is a stepped tax, meaning that it is payable on increasing portions of the property price.
Residential Properties
If you, or your spouse or civil partner, do not own any other property (or a share in a property), anywhere in the world at completion you will pay the normal rate of Stamp Duty. This will also apply if you are replacing your main residence.
| Band | Stamp Duty Rate | Higher Stamp Duty Rate |
|---|---|---|
| Up to £125,000 | 0% | 3% |
| £125,000 – £250,000 | 2% | 5% |
| £250,000 – £925,000 | 5% | 8% |
| £925,000 – £1.5 million | 10% | 13% |
| Over £1.5 million | 12% | 15% |
Buyers of additional residential properties, such as second homes or buy-to-let properties, will have to pay an extra 3% surcharge. This higher rate applies to properties bought for £40,000 or more.
Please note, if you are selling your previous main home within 3 years of buying your new home you can apply to HMRC for a refund of the higher rate paid.
Commercial/Mixed Use Property
The rates of SDLT are lower for commercial properties and agricultural land. As with residential properties, the rate of SDLT is calculated on a stepped basis:
| Band | Stamp Duty Rate |
|---|---|
| Up to £150,000 | 0% |
| £150,000 to £250,000 | 2% |
| Over £250,000 | 5% |
The top rate is 5% and these rates apply whether the property is freehold or leasehold. However, be aware that more SDLT may be payable if the rent is above certain levels.
Reliefs and Exemptions
There are certain SDLT reliefs and exemptions available which help to reduce the amount of tax payable:
- First-time buyer’s relief: if you are a first-time buyers in the UK you will pay no Stamp Duty on properties purchased for up to £300,000. This relief only applies to the first £300,000 and for properties costing up to £500,000. If you are jointly buying a property, both of you need to be eligible first time buyers to qualify for the relief.
- Multiple Dwellings relief: where two or more dwellings are purchased in a single or linked-transaction multiple dwellings relief can be claimed. This means you can apply SDLT to the mean value of the dwellings, rather than the actual value of the dwellings. ‘Dwelling’ means a building or part of a building which is suitable for use as a single dwelling or is in the process of being constructed or adapted for such use.
Exemptions
- The property is left to you in a will
- The property is transferred because of divorce or dissolution of a civil partnership
- No money or other consideration is paid for the property transfer
Points to Note
- From the 1st March 2019, the filing period for an SDLT return and payment was reduced from 30 days to 14 days. The SDLT return must be submitted and paid on time to avoid a fine of £100 plus the threat of further penalties and interest.
- HMRC has the power to investigate for up to 20 years after completion of your purchase if they believe there to have been a fraudulent misrepresentation on your return. If they find you have given incorrect information on the return you may be charged with fraud.
- HMRC has the power to investigate for up to 4 years after completion of your purchase, if they believe there to have been an honest mistake in completing the return.