What is Stamp Duty Land Tax (SDLT)?
SDLT is a tax that must be paid if you buy, lease or are transferred rights for any property or land over a certain price in England and Northern Ireland (there are different taxes for properties in Scotland and Wales).
You pay this tax when you:
- buy freehold property or land
- enter into a new lease or renew an existing lease for property or land
- are transferred rights over any property or land (such as an easement being granted)
- are given the opportunity to benefit from property or land (such as the right to occupy a property or receive rent)
SDLT will need to be considered irrespective of if these transactions are entered into individually or part of a shared ownership purchase with other parties.
The rate of tax you pay is dependent on the type and price of the property you are buying. The purchase price of the land and property will be inclusive of any mortgage obtained. For leases the purchase price will consist of the lease premium and the net present value of the rent payable.
The rates for purchases of residential property is calculated in bands, as below:
|Up to £250,000
|The next £675,000 (the portion from £250,001 to £925,000)
|The next £575,000 (the portion from £925,001 to £1.5 million)
|The remaining amount (the portion above £1.5 million)
The rates for purchases of non-residential or mixed-use property is calculated in bands, as below:
|Up to £150,000
|The next £100,000 (the portion from £150,001 to £250,000)
|The remaining amount (the portion above £250,000)
Where two or more purchases are part of a single scheme or a series of transactions between the same purchaser and seller, they may become linked transactions for SDLT. This would mean that the SDLT rates would need to be applied to the multiple purchases as if they were one transaction rather than in isolation.
There are different thresholds for where SDLT starts. If the property you are buying is below this threshold, then you will not have to pay SDLT.
The current thresholds (since 23rd September 2022) are:
- £250,000 for residential properties
- £425,000 for first-time buyers buying a residential property worth £625,000 or less
- £150,000 for non-residential land and properties
The rate at which you pay SDLT is dependent on certain criteria. For example, there are different rates if:
- You’re a first-time buyer
- You already own a property and you’re buying an additional property
- A non-natural entity such as a company is purchasing the property or a Trust
- You’re not a UK resident
- You are purchasing more than one dwelling
For example, if you were a first-time buyer, purchasing a property for £600,000, your tax would be calculated like this:
- No Stamp duty paid on the first £425,000
- 5% on remining £175,000
- Total tax to pay of £8,750 at the effective rate of 1.5%
However, if you were to purchase a property for £600,000 and you were not a first-time buyer, but had no other property or you had sold your current main residence before or on the same day as the purchase of your new property, your tax would be calculated like this:
- No Stamp duty paid on the first £250,000
- 5% on remining £350,000
- Total tax to pay of £17,500 at the effective rate of 2.9%
First-time buyers’ relief
If you have not previously owned a residential property (or if all purchasers have not in the case of a joint purchase) then you may qualify for first-time buyers’ relief if the following conditions are also met:
- You intend to occupy the property as your main and only residence
- The purchase does not fall under the 3% additional SDLT rate as mentioned below
- The purchase is not linked to another transaction that is not relevant to the main residence purchase
First-time buyers’ relief is only available for property purchases under £625,000. The first £425,000 will be SDLT free with the remaining amount being charged at 5%.
Buy-to-let, second homes
Since April 2016 buy-to-let and second home buyers in England and Northern Ireland have had to pay an additional 3% on each SDLT band as below:
||buy-to-let/second home rate (April 2016)
|£0 - £250,000
|£250,001 - £925,000
|£925,001 - £1.5m
If you are purchasing the property jointly with another individual and the additional 3% SDLT applies to the other party, it will taint the whole purchase and every purchasing party will be subject to the additional 3% rates.
Generally, companies purchasing residential property will be subject to this additional 3% rate.
15% rate for companies
Where a non-natural entity such as a company purchases residential land or property for more than £500,000 then a flat rate of SDLT of 15% may apply to the whole purchase price.
There are some exemptions from this flat 15% rate including if the property is going to be let out on commercial terms or for a property development business amongst others.
Where this rate applies it will take priority over the additional 3% rate mentioned above. This means that where the 15% rate applies the additional 3% rate will not apply.
Non-UK residents SDLT
Overseas buyers who purchase a residential property in England and Northern Ireland are charged an additional 2% surcharge (since 1 April 2021).
This 2% surcharge is on top of the 3% buy-to-let/second homes surcharge charge as well as the 15% rate on purchases made by companies and the standard SDLT rates for home buyers.
The surcharge is applied to non-resident buyers regardless of if they are a company or individual but subject to a few exceptions for specific collective investments vehicles such as REITs.
Multiple dwellings relief
Where more than one dwelling is purchased as part of one or more linked transactions multiple dwellings relief may be available.
This relief will limit the SDLT payable to the higher of:
- The SDLT payable on the average price per dwelling multiplied by the total number of dwellings and
- 1% of the total purchase price.