Guide to SDLT

Stamp Duty Land Tax (SDLT) is a tax purchasers pay when they buy freehold or leasehold property in England and Northern Ireland. It is a significant source of revenue for the UK government with billions being earned on land transactions each year.

The tax was introduced by Part 4 of the Finance Act 2003, and replaced the previous stamp duty on land transactions that applied before that date. In Scotland and Wales the tax is different, and called Land and Buildings Transaction Tax and Land Transaction Tax respectively. 

How much SDLT will you have to pay?

Below certain threshold values, no SDLT is payable at all. Above the threshold values, the SDLT payable increases with the value of the property. Reliefs and exemptions will apply in certain cases. 

The SDLT payable will generally depend on:

• the "chargeable consideration" or purchase price,
• the purpose for which the property is being purchased e.g. commercial, residential, or mixed use,
• the type of purchaser e.g. first-time buyers, charity etc.,
• the type of transaction e.g. straight forward purchase, part of a probate, part of a divorce settlement.

Calculating the tax payable can be complex and, particularly where reliefs are sought, specialist tax advice is highly recommended. While legal advisers can assist with completing the SDLT forms, most do not provide specialist tax advice. 

SDLT Thresholds

The most important first step is to consider the threshold amount that applies, and accordingly whether SDLT is payable at all. The current threshold amounts are set out in the tables below (and were most recently updated by the government in September 2022).

Standard residential rates

Non-residential / Mixed Land and Property rates

Non-residential property includes shops, offices, property that is not suitable for residential purposes, agricultural land, or six or more residential properties bought in a single transaction. Mixed property is one that has both residential and non-residential elements.

SDLT Savings - Exemptions and Reliefs

Exemptions from SDLT arise in the following circumstances:

• An official transfer of property in connection with divorce or the breakdown of the marriage.
• Inheriting a property (although this may impact the rate of SDLT on any future purchase).
• Receiving property as a gift (although SDLT will be payable on the amount of any mortgage over the property). 

The most common SDLT reliefs include:

First-time buyers relief

For first-time buyers of residential property in England and Northern Ireland, no SDLT is payable on the first £425,000, and a rate of 5% is payable on the value between £425,001 and £625,000. If the property value is greater than £625,000 however, standard rates will apply to the entire purchase. 

Mixed-use (where a portion of the property is non-residential)

A common approach to achieving SDLT savings has been to assess whether any part of residential property being purchased falls into the non-residential category. Several possibilities could apply, including large areas of gardens and grounds disproportionate to the size of the house, a forested area, agricultural land, and commercial use for part of the property.

In these circumstances, it may be possible to assess the property as mixed use with the lower SDLT threshold rates applying. Unfortunately, HMRC has recently become more strict about the application of this relief. 

Multiple dwellings relief 

If there is more than one single dwelling being purchased, SDLT relief may be available. This could apply in circumstances where several dwellings are being purchased at the same time, where a dwelling has a separate ‘granny flat’, or where one large property is internally divided into a number of dwellings. 

Charities relief

Subject to certain conditions, charities are entitled to relief from SDLT when they buy land and property for charitable purposes. 

Non-UK Residents surcharge

If you are a non-UK resident and your property is in England or Northern Ireland, a 2% SDLT surcharge will be payable in addition to all other rates of SDLT.  Several factors may apply to the question of whether or not a transaction is considered non-resident including looking at the residence of each purchaser involved.

Practicalities of paying SDLT

HMRC provides a calculator which can be used to help work out how much SDLT is payable. SDLT is a self-assessment tax, and it is the purchaser’s responsibility to complete the SDLT return, calculate and pay the tax correctly.