Stamp Duty Land Tax (SDLT)


The rules relating to Stamp Duty Land Tax are detailed and complex and this is not designed to be a definitive guide. A guidance note has been issued by HM Revenue and Customs which you can view at https://www.gov.uk/stamp-duty-land-tax  Please note that the following advice is designed for straightforward transactions only.



Overview
Stamp Duty Land Tax (SDLT) is a tax you pay the government when you do one of the following:
  • Buy a freehold property
  • Buy a new or existing leasehold
  • Buy a property through a shared ownership scheme
  • Are transferred land or property in exchange for payment, e.g. you take on a mortgage or buy a share in a house

Usually, your solicitor/conveyancer will file your SDLT return and pay the tax on your behalf on the day of completion. They will also claim any relief that you are eligible for (e.g. first-time buyer’s relief or multiple dwellings relief).

How much tax you pay depends on:

  • whether the land or property is residential
  • whether the land or property is non-residential or mixed-use
  • whether you’re a first-time buyer
  • whether you own an interest in another property
We recommend using HM Revenue and Customs’ SDLT calculator to help determine how much tax you are required to pay: https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro




‘Normal’ SDLT rates – i.e. you have purchased a home before


Property / lease premium or transfer value  SDLT
Up to £125,000 Zero 
The next £125,000 (the portion from £125,001 to £250,000)  2% 
The next £675,000 (the portion from £250,001 to £925,000)  5% 
The next £575,000 (the portion from £925,001 to £1.5 million)                   10%
The remaining amount (the portion above £1.5 million) 12%


Example: If you buy a house for £300,000, the SDLT you owe is calculated as follows:

• 0% on the first £125,000 = £0
• 2% on the next £125,000 = £2,500
• 5% on the final £50,000 = £2,500
Total SDLT = £5,000




First-time buyer’s relief

 Property/lease premium or transfer value SDLT rate
Up to £300,000 Zero
The next £200,000 (the portion from £300,001 to £500,000)                        5%


If the price is over £500,000, you follow the ‘normal’ SDLT rates.


You are eligible for the First Time Buyer’s Relief if:

  • You, and anyone else you are buying with, are first-time buyers
  • The property will become your only or main residence
  • You complete your purchase on or after 22 November 2017

Example 1: If you buy a house for £275,000, the SDLT you owe is calculated as follows:
  • 0% on the first £300,000 = £0
  • Total SDLT = £0
Example 2: If you buy a house for £475,000, the SDLT you owe is calculated as follows:
  • 0% on the first £300,000 = £0
  • 5% on final £175,000 = £8,750
  • Total SDLT = £8,750


Higher rates for additional properties


You will usually have to pay 3% on top of the normal SDLT rates if buying a new residential property means that you will own more than one.


Property/lease premium or transfer value SDLT rate 
Up to £125,000 3%
The next £125,000 (the portion from £125,001 to £250,000) 5%
The next £675,000 (the portion from £250,001 to £925,000) 8%
The next £575,000 (the portion from £925,001 to £1.5 million)                13%
The remaining amount (the portion above £1.5 million) 15%


Who the higher rates apply to:

You may have to pay the higher rates even if you intend to live in the property you’re buying (and regardless of whether or not you already own a residential property). This is because the rules do not apply only to you (the buyer), but also to anyone you’re married to or buying with.
  • If you’re married or in a civil partnership - the rules apply to you both as if you were buying the property together, even if you’re not. If either of you individually have to pay the higher rates, you must pay the higher rates for the transaction as a whole (unless you’re permanently separated).
  • Buying with someone else - the rules apply to each person (and their spouse) who is buying the property. If any of you individually have to pay the higher rates, you must pay the higher rates for the transaction as a whole.
  • If you’re buying as a trustee - the rules may apply to the beneficiary of the trust and not to you, depending on the type of trust it is.
You won’t pay the extra 3% SDLT if the property you’re buying is replacing your main residence and that is being sold simultaneously. If there is a delay selling your main residence and it hasn’t been sold on the day you complete your new purchase:
  • you will have to pay higher rates because you own 2 properties
  • you may be able to get a refund if you sell your previous main home within 36 months



Reliefs and exemptions


You may be eligible for SDLT reliefs if you’re buying in certain situations. These reliefs can reduce the amount of tax you pay.

HMRC has guidance on SDLT reliefs for:
  • first-time buyers
  • multiple dwellings
  • building companies buying an individual’s home
  • employers buying an employee’s house
  • local authorities making compulsory purchases
  • property developers providing amenities to communities
  • companies transferring property to another company
  • charities
  • right to buy properties
  • registered social landlords

HMRC’s guidance on reliefs can be found here: https://www.gov.uk/stamp-duty-land-tax/reliefs-and-exemptions


You do not have to pay SDLT or file a return if:
  • no money or other payment changes hands for a land or property transfer
  • property is left to you in a will
  • property is transferred because of divorce or dissolution of a civil partnership
  • you buy a freehold property for less than £40,000
  • you buy a new or assigned lease of 7 years or more, as long as the premium is less than £40,000 and the annual rent is less than £1,000
  • you buy a new or assigned lease of less than 7 years, as long as the amount you pay is less than the residential or non-residential SDLT threshold
  • you use alternative property financial arrangements, for example to comply with Sharia law

HMRC’s guidance on exemptions can be found here: https://www.gov.uk/guidance/stamp-duty-land-tax-transactions-that-dont-need-a-return