Stamp Duty Land Tax (SDLT)

What Is the Stamp Duty Land Tax (SDLT)?

The term stamp duty land tax (SDLT) refers to a tax imposed by the U.K. 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 14 days of the completion of a property purchase or transfer in England and Northern Ireland. The rates payable depend primarily on whether the land or property is for residential, non-residential, or mixed purposes.

Key Takeaways

  • The stamp duty land tax is imposed by the U.K. government on the purchase of land and properties with values over a certain threshold.
  • The amount of tax charged on property owners depends on the type of property and the date of purchase.
  • The tax on residential properties varies throughout the year while non-residential and mixed-use property rates remain constant at £150,000.
  • HMRC requires an SDLT return even if the land or property value is below the threshold unless there's an exemption.

Understanding the Stamp Duty Land Tax (SDLT)

People who live in England and Northern Ireland are subject to the stamp duty land tax whenever they purchase property of any kind or transfer it in kind for payment, including:

  • Residential property: intended for use as the principal residence of the purchaser
  • Non-residential land and property: this includes commercial property, such as shops or offices, and land for farming
  • Mixed-use property: a property that consists of both residential and commercial spaces

The amount of tax is determined based on a number of factors, including the date of purchase and the purchase price, along with the type of property. Here's a breakdown of the SLDT thresholds by date and type of property:

Stamp Duty Land Tax Thresholds
Date of Purchase Residential Property Non-Residential and Mixed-Use Property
July 8, 2020-June 30, 2021 £500,000 £150,000
July 1, 2021-Sept. 30, 2021 £250,000 £150,000
Oct. 1, 2021  £125,000 £150,000

The SDLT payable increases on a sliding scale for values above various thresholds, with the highest rate being 12% of the cost 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.

Payment is due within 30 days of the completion of purchase of freehold property or the acquisition of a new or pre-existing leasehold. The tax is also payable on the purchase of a property through a shared ownership operated by an approved public body, such as housing associations or development corporations.

Homeowners in Scotland pay the Land and Buildings Transaction Tax while those in Wales are charged the Land Transaction Tax.

Special Considerations

Even when the value of the land or property purchased is below the stamp duty land tax threshold, the HMRC requires an SDLT return to being lodged, unless there is an exemption. Exemptions on lodging the stamp duty land tax return are standard in cases where no money is exchanged on the transfer of a property or where the freehold property purchase is less than £40,000.

If the purchase of residential property means the buyer will have more than one property, an additional rate of 3% is levied on top of the standard SDLT amount. Special rates apply to the purchase of properties by corporate entities, individuals who purchase six or more properties in one transaction, or for multiple purchases or transfers conducted between the same buyer and seller.

Tax relief is available in certain circumstances, which may reduce the amount of SDLT payable. For instance, first-time homeowners are entitled to a discount. Comprehensive information regarding the rates, rules, and requirements relating to stamp duty land tax is provided by HMRC on its website.

History of the Stamp Duty Land Tax (SDLT)

The United Kingdom's stamp duty was introduced in the 1600s. This tax was applied to a variety of items, including clothing, medicines, publications, and even checks. Money collected was used to fund state interests, such as war.

The system changed over the years, and the stamp tax was eliminated for most goods and services but not on property. The SDLT system enforced today was established in the late 1950s. At that time, the average price for a home was £20,000 and the tax was fairly inexpensive—buyers were not charged on any purchases under £30,000, after which they were only charged 1%.

Revenue collected from the stamp duty land tax amounted to about £11.6 billion between 2019 and 2020.

Article Sources
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