Stamp Duty Land Tax (SDLT)

DEFINITION of 'Stamp Duty Land Tax (SDLT)'

The Stamp Duty Land Tax (SDLT) is the tax imposed by the UK Government on the purchase of land and properties with values over a certain threshold. This tax is payable to Her Majesty's Revenue and Customs (HMRC), and must be remitted within 30 days of the completion of purchase. The rates payable depend largely on whether the land or property is for residential, non-residential, or mixed purposes.

BREAKING DOWN 'Stamp Duty Land Tax (SDLT)'

Stamp Duty Land Tax (SDLT) is applied on the purchase value of a land or property above a certain figure. As of 2017, the value at which SDLT becomes applicable is £125,000 for residential properties and £150,000 for non-residential or mixed-use land and properties.

When Stamp Duty Land Tax is Applied

The tax must be paid upon the purchase of a freehold property or the purchase of a new or pre-existing leasehold. SDLT is also payable on the purchase of a property through a shared ownership scheme operated by an approved public body, such as housing associations or development corporations.

If the ownership of land or property is transferred to someone in exchange for any payment, Stamp Duty Land Tax may be applicable to that transaction. The rules around SDLT depend on the conditions of the transfer, and HM Revenue and Customs (HMRC) provides detailed information on property transfers involving circumstances such as marriage or divorce, gifts, inheritance, or jointly owned land or property.

Even when the value of the land or property purchased is below the Stamp Duty Land Tax threshold, HMRC requires an SDLT return to be lodged, unless there is an exemption. Exemptions on lodging an SDLT return are typical in cases where no money is exchanged on the transfer of a property, or where a freehold property is purchased for less than £40,000.

SDLT Payable

The major variable that determines the amount of SDLT that must be paid is the intended function of the land or property. Land or properties that are purchased for non-residential or mixed purposes attract different levels of tax from those that are bought as residential properties.

A residential property is defined as one intended to be used as the main residence of the purchaser. Non-residential land and property includes commercial property such as shops or offices, and land for farming. A mixed-use property is one that includes both residential and commercial aspects, such as a shop with a flat above it.

The SDLT payable increases on a sliding scale for the amount of value above various thresholds, with the highest rate being 12% of the value that exceeds £1.5 million on residential properties. On the other hand, the highest rate for non-residential land and property is 5% payable on any amount above £250,000.

Additional Considerations

If the purchase of a residential property means that the buyer will have more than one property, there will be an additional rate of 3% levied on top of the standard SDLT amount.

Special rates apply to the purchase of properties by corporate entities, individuals purchasing six or more properties in one transaction, or multiple purchases or transfers conducted between the same buyer and seller (known as linked purchases).

Tax relief is available in certain circumstances, which may reduce the amount of SDLT payable. Comprehensive information regarding the rates, rules and requirements relating to Stamp Duty Land Tax is provided by HMRC on their website.