Stamp duty land tax (SDLT) is payable on property and land purchases above set SDLT thresholds. The buyer pays stamp duty, which usually applies to both freehold and leasehold transactions
Because SDLT can significantly increase purchase costs, it may be worth investigating any stamp duty planning opportunities when considering a property purchase.
What is stamp duty?
Stamp duty land tax (SDLT) is a self-assessed, compulsory tax payable by buyers on most property transactions in England and Northern Ireland. (There is an equivalent Land and Buildings Transaction Tax, LBTT, in Scotland. In Wales, Stamp duty has been replaced with Land Transaction Tax.)
Stamp duty is payable on property and land purchases or transfers above set SDLT thresholds and applies to both freehold and leasehold transactions. Most property transactions must be reported to HM Revenue & Customs (HMRC) even if SDLT is not payable.
How is stamp duty calculated?
SDLT for both commercial and residential property is charged on the purchase price. It is calculated on the proportion of a property's value in each tax band.
SDLT is not payable on the price of commercial properties up to £150,000 and up to £250,000 for residential properties. First-time buyers of residential property worth upto £625,000 do not pay SDLT on the first £425,000.
Amounts paid over the initial stamp duty-free bands are calculated on the amount of purchase price falling within each tax band.
For example, if a commercial property was purchased for £185,000, there would be nothing to pay on the first £150,000 and 2% SDLT would be payable on the remaining £35,000.
You must send HMRC an SDLT return and pay the tax due within 14 days of completing the purchase.
You can use the Stamp Duty Land Tax Calculator on the GOV.UK website to work out how much SDLT is payable.
Stamp duty relief
For first-time buyers of residential or shared-ownership property worth up to £625,000, there is no SDLT where the purchase price is up to £425,000 or less. SDLT is charged at 5% on the portion between £425,001 and £625,000. For properties worth over £625,000 the rules are the same as for people who have previously bought a home.
You can find information on other reliefs and exemptions on the GOV.UK website.
You may also be able to claim stamp duty relief if you buy land or buildings in a designated Freeport tax site. You can also claim SDLT relief if you buy a lease for land or buildings in a Freeport, or for any rental payments for the lease in such as area.
Stamp duty on commercial property
Stamp duty land tax (SDLT) applies to purchases and transferes of commercial properties and land. The tables below provide the details of the current SDLT tax bands and rates.
Freehold Non-residential (Commercial property) Stamp Duty Land Tax rates
|
Purchase price (non-residential or mixed use) |
SDLT rate paid on the property amount within each tax band |
|
Up to £150,000 |
0% |
|
Between £150,001 and £250,000 |
2% |
|
Over £250,000 |
5% |
Leasehold Non-residential (Commercial property) Stamp Duty Land Tax rates
When you buy a leasehold property, you pay SDLT on the lease purchase price using the rates in the table above. For a new lease, you also pay SDLT on the value of any annual rent payable over the life of the lease, calculated using the rates below.
If you buy an existing 'assigned' lease, you are only liable to SDLT on the lease price.
|
Value of rent (non-residential or mixed use) |
SDLT rate paid on the property amount within each tax band |
|
Up to £150,000 |
0% |
|
Portion between £150,001 and £5,000,000 |
1% |
|
The portion over £5,000,000 |
2% |
Businesses in designated Investment Zones will qualify for full SDLT relief for land and buildings that is purchased for use or development for commercial purposes.
Residential Stamp Duty Land Tax rates
|
Purchase price/lease premium or transfer value |
SDLT rate paid on the property amount within each tax band |
|
Up to £250,000 (or up to £425,000 for first-time buyers, including those buying shared-ownership properties) |
0% |
|
Between £250,001 - £925,000 |
5% |
|
Between £925,001 - £1.5 million |
10% |
|
Over £1,500,001 |
12% |
Non-UK residents purchasing a UK residential property usually pay a 5% surcharge on the rates above.
If you are buying a leasehold residential property, you may also have to pay SDLT on the value of the total rent payable over the life of the lease. SDLT is payable at 1% on the value of the rent in excess of £250,000.
Stamp duty on second property
There are higher rates of SDLT which apply where a person is purchasing an additional residential property or 'second home' - such as a holiday home or buy-to-let investment. The rate of SDLT is five percentage points above the rates for residential properties listed above.
For example, if a second residential property was purchased as a holiday cottage which cost £300,000, SDLT of 5% would be charged on the purchase price up to £250,000 and 10% SDLT would be payable on the remaining £50,000 of the purchase price.
Company purchases of residential property
There is a 5% surcharge (previously 3%) on residential property bought by companies. For residential properties worth more than £500,000 bought by a company, a 17% charge (previously 15%) may apply. These rates apply from 31 October 2024.
Companies that own residential property worth more than £500,000 may also need to pay an 'annual tax on enveloped dwellings'.
Stamp duty land tax planning
Stamp duty land tax is based on the purchase price of the land and property. Separating out anything else included in a transaction - such as machinery, furniture or carpets - will reduce the taxable price on which SDLT is payable.
At the same time, you may want to use the opportunity to identify which items will qualify for capital allowances to be set against income tax or corporation tax.
It may be possible to reduce or eliminate SDLT on larger transactions, using complex SDLT mitigation schemes. You should take specialist advice, because HMRC may look to challenge any reduction in the SDLT paid.
You can find more detailed information on SDLT on the GOV.UK website.
