What is Stamp Duty Land Tax (SDLT)?
Stamp Duty Land Tax (SDLT) is a tax levied on the purchase of property or land in England and Northern Ireland. It is applicable to both residential and non-residential property transactions and must be paid by the buyer. The tax is calculated based on the purchase price of the property, with different rates applied to different portions of the price.
When is SDLT Payable?
SDLT is payable when you:
- Buy a freehold property
- Buy a new or existing leasehold
- Buy a property through a shared ownership scheme
- Are transferred land or property in exchange for payment (including taking on a mortgage or buying a share in a house)
The tax must be paid within 14 days of the completion date (the day the property purchase is finalized). The buyer must file an SDLT return to HM Revenue and Customs (HMRC) and pay any tax due.
Current SDLT Rates (As of 2024)
SDLT rates vary depending on the type of property (residential or non-residential) and the purchase price. There are also different rates for first-time buyers and additional property purchases. Below are the current SDLT rates:
Residential Property Rates
For standard residential property purchases:
- £0 to £250,000: 0%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Above £1.5 million: 12%
For first-time buyers purchasing a property worth up to £625,000:
- £0 to £425,000: 0%
- £425,001 to £625,000: 5%
- (Only on the portion from £425,001 to £625,000)
For additional properties (e.g., buy-to-let or second homes):
- An additional 3% surcharge is added to each of the standard rates. For example:
- £0 to £250,000: 3%
- £250,001 to £925,000: 8%
- £925,001 to £1.5 million: 13%
- Above £1.5 million: 15%
Non-Residential and Mixed-Use Property Rates
For non-residential or mixed-use properties (properties used for both residential and commercial purposes):
- £0 to £150,000: 0%
- £150,001 to £250,000: 2%
- Above £250,000: 5%
Leasehold Properties
When purchasing a leasehold property, SDLT is calculated on both the lease premium (the purchase price) and the net present value (NPV) of the rent payable over the term of the lease. The rates for the lease premium are the same as for freehold properties. The rates for the NPV of rent are:
- £0 to £125,000: 0%
- Above £125,000: 1%
Calculating SDLT
To calculate the SDLT owed, you need to apply the relevant rates to portions of the property price. For example, if you buy a residential property for £600,000 as a standard buyer:
- The first £250,000 is taxed at 0% = £0
- The next £350,000 (from £250,001 to £600,000) is taxed at 5% = £17,500
- Total SDLT = £0 + £17,500 = £17,500
Exemptions and Reliefs
There are certain situations where SDLT may not be payable, or where reliefs are available, including:
- First-Time Buyer Relief: For first-time buyers purchasing a property up to £625,000.
- Multiple Dwellings Relief: For transactions involving multiple properties.
- Property Transfers: No SDLT is payable on property transfers due to divorce or dissolution of a civil partnership, or when property is left in a will.
Conclusion
Stamp Duty Land Tax (SDLT) is an essential consideration for anyone buying property in England and Northern Ireland. Understanding the current rates and how to calculate the tax can help you budget effectively and ensure compliance with HMRC requirements. If you are uncertain about how much SDLT you need to pay or if you qualify for any reliefs, it is advisable to seek professional advice from a tax advisor or conveyancer.