Stamp Duty Land Tax

31 March 2023

Stamp Duty Land Tax (SDLT) is a tax on transactions concerned with the sale/ purchase of land and property, the creation of leases, the assignment (sale and purchase) of leases and certain financial transactions.

SDLT and Sales

All transfers of title in land or property are potentially subject to SDLT. Only those transfers for more than £125,000 will be charged SDLT which is calculated on a graded scale. It depends on how much of the sale prices falls into each of the rate bands. Rates at 1 April 2016 are:

Price Band Standard rate   Buy to let/second home
Up to £125,000 0% 3%
£125,001 to £250,000   2% 5%
£250,001 to £925,000 5% 8%
£925,001 to £1.5m 10% 13%
£1.5m+ 12% 15%

Purchases over £500,000 by non-natural persons or corporate bodies attract SDLT of 15%.

SDLT is payable by the buyer of a property on the whole amount of the sale price if that exceeds the threshold. There maybe changes to the stamp duty land tax rates, especially at budget time.

As well as paying any SDLT due, a buyer is required to fill in a Land Transaction Return (LTR) which is sent to HMRC along with any tax due within 30 days.

HMRC Stamp Duty Land Tax calculator

Annual Tax on Enveloped Dwellings (ATED)

In addition to SDLT, higher value properties are subject to an annual tax (the annual tax on enveloped dwellings or ATED) where these properties are owned by companies. This came into effect in April 2013 and is payable every year. Properties are liable to the tax if the following rules apply:

  • The property is a dwelling
  • It is situated in the UK
  • It was valued at more than £2 million on 1 April 2012 (or at acquisition if later)
  • It is owned completely or partly by a company.

The valuation as determined above is used for the first five years the tax is collected.

In the 2014 budget it was announced that new tax bands are to be introduced from 1 April 2015:

  • From 1 April 2015 properties with a value greater than £1 million but no more than £2 million will be subject to an annual charge of £7,000.
  • From 1 April 2016, properties with a value of more than £500,000 but not more than £1 million will be subject to an annual tax of £3,500.

SDLT and Leases

SDLT is payable on premiums at the same scale as for freehold transactions where properties are sold (as per the table above). It is also payable on the balance of the net present value (NPV) over the threshold of £125,000. Where the premium is high enough for SDLT to be due and the NPV of the rent paid is also high enough for SDLT to be due, both amounts are worked out and added together.

Only the tenant is liable to pay SDLT. When calculating the SDLT for periodic tenancies, it is assumed they will be for 12 months. An option to renew is only taken into account for SDLT if the option is taken. A refund of SDLT will not be given if a tenancy ends early.

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