Stamp Duty Land Tax (SDLT) is paid on the purchase of an interest in land as a percentage of the purchase consideration. 

At a glance

  • SDLT is based on a “banding system” which was introduced from
    • 4 December 2014 for residential property
    • 17 March 2016 for non-residential and mixed-use property.
  • The banding system works in a similar way to income tax; SDLT is calculated on the portion of the property value which falls within each band.
  • An additional 3% SDLT, calculated on each band is charged on the purchase of a dwelling acquired by a company, or when purchased by an individual as a second home or investment,  from 1 April 2016.  See SDLT & dwellings: higher rates.
  • First time buyer's relief applies to purchases that have completed on or after 22 November 2017.
  • The previous SDLT regime was a “slab system”: SDLT was calculated according to which band the total price of property fell into. 

What's new?

In February 2019 the government launched a consultation on plans to introduce a 1% Stamp Duty Land tax (SDLT) surcharge for non-residents buying residential UK land and property. This will be legislated for in a future finance bill; it is not currently known when it will come into force.

From 1 March 2019: changes to payment and filing deadlines

Legislation is included in Finance Act 2019 which will reduce the deadline for paying SDLT and filing the SDLT return to 14 days for transactions on or after 1 March 2019.

From 22 November 2017: First Time Buyers relief

  • No SDLT for first time buyers purchasing homes costing up to £300,000.
  • 5% SDLT on homes costing between £300,000 - £500,000.

A first time buyer is someone who has never owned an interest in a residential property anywhere in the world, and who intends to occupy the property as their main residence.

  • Relief from SDLT higher rate for:
    • Increasing one's share of one's home.
    • Those unable to sell the old property due to Mesher orders etc.
    • People living in properties held in Trust under Court of Protection orders.
  • No replacement of main residence relief from SDLT higher rate where only part of the main residence is disposed of. 

This was extended by proposals announced at Budget 2018.

For transactions from 28 October 2018 and backdated to 22 November 2017:

  • First-time buyers relief will apply to include qualifying shared ownership property purchases, whether or not the purchaser elects to pay SDLT on the market value of the property.
  • The first £300,000 of an initial share purchased will not be liable to SDLT.
  • The remainder of the initial share will be chargeable at 5% on amounts over £300,000.
  • Qualifying shared ownership schemes are those provided by local authorities and housing associations.

Residential Property rates

The SDLT regime for residential property changed to a banding system on 4 December 2014. Please note that higher rates apply to second properties and those held by non-natural persons (see below). First time buyer's relief applies too, as above.

The bands and rates are as follows:

Band: market price £

Residential

0- 40,000 0%
0 -125,000 0%
125,001 – 250,000 2%
250,001 – 925,000 5%
925,001 -1,550,000 10%
1,500,001 and over 12%

The method of calculation is simply to apply the rates specified to the parts of the relevant consideration falling within each band.

Transitional provision

An election could have been made for the new regime not to apply where the transaction was substantially performed before 4 December 2014 (and the contract is not excluded by variation or assignment of rights on or after that date).  The election had to be included in the land transaction return. This effectively gave buyers who had exchanged contracts, but not completed, before the new rules were announced, the option to either apply the old or new system.

 Non-residential Property rates

The SDLT regime for non-residential and mixed use property changed to a banding system on 17 March 2016.

Non-residential property includes:

  • Commercial property such as shops or offices
  • Agricultural land
  • Forests
  • Any other land or property which is not used as a dwelling
  • Six or more residential properties bought in a single transaction
  • A mixed use property is one that incorporates both residential and non-residential elements.

The new rates are as follows: 

Band: market price £ 

Non-residential 
0-150,000 0%
150,001 - 250,000 2%
Over 250,000 5%

 

Transitional provision

An election could have been made for the amendments not to apply where contracts were exchanged before 17 March 2016 and the contract was substantially performed but not completed before that date.

The effective date of the transaction is the date of substantial performance, and a second notifiable transaction takes place on completion.  Additional SDLT will be due on completion if the consideration on completion is more than was notified on substantial performance.

Higher rates for additional dwellings and dwellings purchased by companies

From 1 April 2016 the rates charged on the purchase of an additional dwelling by an individual or a dwelling by a company are 3% above the residential SDLT rates. 

The bands and rates are therefore as follows:

Band: market price £ Additional dwellings/dwellings purchased by non-natural persons for qualifying purpose from 1 April 2016 Properties acquired by non-natural persons from 1 April 2016 for non-qualifying purpose
0- 40,000 0% 0%
0 -125,000 3% 3%
125,001 – 250,000 5% 5%
250,001 – 500,000 8% 8%
500,001 – 925,000 8% 15%
925,001 – 1,500,000 13% 15%
1,500,001 and over 15% 15%


Subscribers: see SDLT & dwellings: higher rate for detail and worked examples. 

A company will be subject to the higher 15% rate of SDLT for acquisitions of property costing more than £500,000, unless the property will be used for a qualifying purpose:

  • a property rental business
  • property developers and trader
  • property made available to the public
  • financial institutions acquiring property in the course of lending
  • property occupied by employees
  • farmhouses.

Broadly, if the property will be subject to an ATED charge, the 15% higher SDLT rate will apply.

SDLT: old regime for residential property up to 3 Dec 2014

Rates were as follows:

Rate

Residential (up to 3 Dec 2014)

£

0% 0-150,000
1% 150,001-250,000
3% 250,001-500,000
4% 500,000-1,000,000
5% 1,000,000-2,000,000
7% (1) (2) Over 2,000,000
15% (3) Over 500,000 (2,000,000 to 20 March 2014)

Notes

(1) Expensive properties where chargeable consideration is £2,000,000 +

7% for residential property transactions

  • From 22 March 2012
  • Purchases by individuals
  • A 7% rate on properties worth £2 million or more

(2) 7% rate for residential property transactions

  • Introduced in Finance Act 2013 - relief broadly matches those given for the Annual Property tax

(3) 15% special rate for residential property transactions

  • On or after 21 March 2012, (subject to transitional provisions for pre-existing contracts).
  • For purchases by non-natural persons

Who are non-natural persons (NNPs)?

Companies, collective investment schemes and partnerships with a member who is a company or a collective investment scheme.

Companies acting in the capacity as trustee of a settlement are excluded from being NNPs.

Reliefs

SDLT will only be charged at 7% for:

  • Property developers who meet the qualifying conditions. The exemption applies for residential developers, but it is not restricted to UK businesses.
  • Property rental businesses.
  • Where property is acquired to be used within certain trading businesses.

There will be a claw back if within three years of the effective date of the acquisition  the property is no longer held for a purpose to which the relief was claimed or is kept for personal or family occupation, additional SDLT will be payable.

First time buyers (residential property)

Between 25 March 2010 and 24 March 2012, first-time buyers were exempt from SDLT if the amount paid for the property was under £250,000. This relief applied whether or not the property was in an area designated as disadvantaged.

Residential SDLT threshold 3 Sept 2008 - 31 December 2009
Between 3 September 2008 and 31 December 2009 the starting threshold for SDLT was £175,000. The threshold was reduced to £125,000 from 1 January 2010.

 

SDLT old regime for non-residential property and mixed use properties up to 16 March 2016

Under the old regime SDLT was calculated on the entire value of the property at a rate determined by which band the overall consideration fell within.

Rates were as follows:

Rate Non-residential £
0% 0-150,000
1% 150,001-250,000
3% 250,001-500,000
4% Over 500,000

 

Time limits and penalties

The deadline for filing an SDLT Return and paying any tax due is 30 days (14 days from 1 March 2019) from the effective date of the transaction.

The effective date is the date of 'substantial performance'. HMRC say in their guidance that this is when:

  • Most of the buying price is paid, normally 90% or
  • The buyer is entitled to possession of the property or
  • The first payment of rent is made (for leaseholds).

There is no penalty for late payment, but interest is charged from the due date up to the payment date

Penalties for late filing:

  • Within 3 months of the filing date fixed penalty £100.
  • Between 3 and 12 months of the filing date fixed penalty £200.
  • More than 12 months after filing date tax geared penalty up to 100% in addition to the fixed penalty.

Tax geared penalties of between 0% and 100% apply if errors are made in a document which lead to a loss of tax, see Penalties: errors in returns and documents.

In August 2016 HMRC launched a consultation aiming to to make SDLT filing and payment more efficient whilst also reducing errors and inaccuracies.  A key proposal was to reduce the filing and payment window to 14 days from early 2018. Following responses to the consultation and the 2017 Autumn budget HMRC have confirmed that this charge will take place for purchases with an effective date on or after 1 March 2019. Unsurprisingly given HMRC’s big digital drive many of the other proposals focus on getting more activity online with less paper forms.  See Consultation: SDLT payment and filing

Legislation is included in Finance Act 2019 effecting the change from 1 March 2019.

Stamp Duty rates
Stamp duty on shares and securities: 0.5%

 

Small Print and Links:

SDLT & residential property: higher rates

SDLT legislation Finance Act 2003 Part 4.  Section 55 contains the rates chargeable.

Legislation relating to the higher rate will be included at Section 56A and Schedule 5A.

Also see Finance Act 2016 Part 8: sections 127 & 128.

HMRC SDLT rates and thresholds (these also give you the rates for leases)

 

Updates

03/09/18 update for Finance Bill 2019

28/11/17 update for SDLT changes in Autumn Budget 2017

15 Sept 2017: updated tables

15 August 2016: Link to consultation on payment and filing added.

28 July 2016: Time limits and penalties section added.

17 March 2016: Guide updated to include Budget 2016 announcements regarding the new regime for non-residential properties and the higher rate applicable to residential property.

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