What is Stamp Duty Land Tax (SDLT)?

Stamp duty land tax is a tax on the acquisition of land in England and Northern Ireland. Scotland charges Land and Buildings Transaction Tax and Wales charges Land Transaction Tax, instead of SDLT.

What is SDLT charged on?

SDLT is charged on land transactions in England and Northern Ireland according to the price paid. A land transaction is any acquisition of a chargeable interest and this includes not only freeholds and leases but also interests, rights and powers over land other than exempt interests such as mortgages and licenses to use land.

What are the rates of SDLT?

There are five different rate structures:

  • “Normal” Table A Residential: 0% – 12%
  • “Higher rates” Table A: 3% – 15%
  • Table B Non-residential and mixed 0% – 5%
  • Higher rate of 15% for non-natural purchasers of dwellings above £500,000
  • First-time buyer rates: 0% up to £300,000 and 5% on balance not exceeding £500,000

What are the stamp duty rates for residential property?

Band Basic residential SDLT rates Higher SDLT rates
£0–£125k 0% 3%
£125k–£250k 2% 5%
£250k–£925k 5% 8%
£925k–£1.5m 10% 13%
£1.5m+ 12% 15%

When is SDLT payable?

Since 1 March 2019 any SDLT is payable to HMRC within 14 days of the effective date of the land transaction. The effective date is normally completion but it can be sooner if for example the buyer goes into occupation before completion or he pays 90% or more of the total price to the seller ahead of completion.

When is stamp duty payable on commercial leases?

When the whole or part of the consideration for a lease consists of rent the SDLT is calculated as a percentage of the net present value of the rent payable over the term of the lease at rates of up to 1% on residential leases and 2% commercial leases. The premium or capital price element of the lease consideration is charged to SDLT at the normal sale rates above.

Can I avoid SDLT if I buy off-plan?

Yes, you can avoid SDLT if you buy off-plan and then sell your contract on to another buyer before completion, occupation or 90% or more of the price is paid to the developer.

When does stamp duty apply instead of SDLT?

The old stamp duty applies to land transactions that broadly speaking were carried out before 1 December 2003 (the date that SDLT was introduced) and it continues to apply to shares, bearer instruments and certain partnership transactions. You will need to send the relevant transfer document to the Stamp Office for physical stamping if you want that document to be legally enforceable. For instance I recently advised on the stamping of a transfer arising out of a land transaction in 1846.

Patrick is authorised by the Bar Standards Board to do Public Access Work and litigation which means that he can work directly with clients and deal directly with HMRC on their behalf. Patrick works on the basis of fixed fees agreed up-front via his Clerk and he does not use open ended hourly rates.

Do you have an SDLT or stamp duty issue that needs resolving or require advice on the liability of a past or a planned transaction? If so, please contact Patrick Cannon here for an initial discussion about the options open to you.

Can stamp duty be paid in installments?

No, stamp duty cannot be paid in installments. 

When do I need to pay stamp duty?

Stamp duty needs to be paid in full within 14 days of the initial transaction, or the date you completed the purchase of property. This was reduced from 30 days on 1 March 2019.

If you don’t submit a SDLT return or don’t pay the tax within 14 days, you might incur penalties and interest from HMRC.

Can I add stamp duty to my mortgage?

If you can’t afford to pay your stamp duty bill in full, you have the option to borrow more from your mortgage to cover the tax bill, if your lender is willing to increase your loan.

It’s important to remember that you’ll pay interest on the extra money you’ve borrowed, and with mortgages usually taken out over a long period of time (25 years or more), the costs will add up.

Furthermore, increasing your mortgage to cover you stamp duty could affect your loan-to-value (LTV) ratio, which is the measure of how much a property’s value you borrow. Most competitive offers have a maximum requirement LTV of 60%, so speak to a stamp duty land tax specialist or mortgage broker to make sure its the right decision for you.

Do you pay stamp duty when you sell a house?

No, the home buyer is usually responsible for paying stamp duty, not the seller.

If I don’t owe any SDLT, do I need to do anything?

If you purchase a property worth £40,000 or more, you will need to file an SDLT return for HMRC, even if you do not owe any stamp duty. 

Your solicitor or SDLT specialist will usually file this on your behalf. If you haven’t already appointed one, Patrick Cannon can assist with any matters relating to SDLT and your property purchase.

When is the flat rate of 15% SDLT applied?

The flat rate of 15% SDLT is charged on the value of any residential property costing more than £500,000 bought by a corporate body, or non-natural person. This includes:

  • Companies
  • Partnerships
  • Collective investment schemes

The 15% SDLT rate does not apply to property bought by a company that is acting as a trustee or that is bought to be used for:

  • Property rental (buy-to-let)
  • Property developers and traders
  • Property for the public
  • Property occupied by employees
  • Financial institutions acquiring property in the course of lending
  • Farmhouses

This tax rate is designed to tax properties that are bought by foreign nationals within a limited company, which would usually attract a much lower rate of stamp duty land tax through re-sale.

If I own a rental property, will I have to pay the 3% SDLT surcharge when I buy my first home?

Yes, you will have to pay the additional stamp duty rate of 3% on top of the standard stamp duty bill.  This is because it will be the second property owned by you, no matter how you use it.

Can I get a stamp duty refund?

Yes, you can claim for a stamp duty refund if you have purchased a new main residence before selling your previous one, and then sell your previous residence with 3 years of purchase of the new one.

Any claims must be made within 12 months of the sale of the previous main residence, or 12 months within the filing date of the new residence, whichever is later.

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