Stamp Duty Land Tax
Stamp Duty Land Tax (SDLT) is the tax paid by the purchaser when buying property or land in England and Northern Ireland. It applies to all kinds of property transactions, from buying a house to creating or assigning a lease. If you’re considering property investment or acquiring a commercial lease in Nottingham, AHACCOUNTANTS is here to help you make your purchase as tax-efficient as possible.
Who Pays the Tax?
SDLT is the responsibility of the purchaser in land transactions in England and Northern Ireland. For land purchases in Scotland, the equivalent tax is Land & Buildings Transaction Tax (LBTT), while in Wales, it’s called Land Transaction Tax (LTT).
What is a Land Transaction?
A land transaction occurs when there’s an acquisition of an interest in land. This can be as simple as buying a house or as complex as assigning a lease.
What is the Tax Charged On?
SDLT is based on the consideration, usually the cash price agreed for the property. But the rules are broad, covering situations where value is transferred in other forms, like when a purchaser agrees to carry out work on the property as part of the deal.
When is the Tax Payable?
SDLT must be paid when the contract is substantially performed—typically when the purchaser takes possession on completion. However, if possession happens before completion, known as ‘resting on contract,’ that will trigger the tax.
How Much Tax is Payable on Residential Property?
SDLT rates are tiered, meaning different portions of the property value are taxed at different rates:
| Purchase Price of Property | SDLT Rate (%) |
| £0 – £250,000 | 0 |
| £250,001 – £925,000 | 5 |
| £925,001 – £1,500,000 | 10 |
| £1,500,001 and above | 12 |
First-Time Buyer Relief
First-time buyers may be eligible for relief on properties up to £625,000. The breakdown is as follows:
| Property Value | SDLT Rate (%) |
| £0 – £425,000 | 0 |
| £425,001 – £625,000 | 5 |
If the property value exceeds £625,000, no relief is available, and the standard rates apply.
Additional Residential Properties
If you’re purchasing a second home or a buy-to-let property over £40,000, you’ll pay higher rates, which are 3% higher than the standard SDLT rates. This applies if you own more than one property at the end of the day of the transaction.
Good news: You have 36 months to claim a refund of the higher rate if you buy a new main residence before selling your previous one.
Multiple Dwellings Relief (MDR)
If you’re buying more than one residential property, there’s relief available, called Multiple Dwellings Relief (MDR). Instead of being taxed on the total value of the properties, you’re taxed on the average value of each property, subject to a minimum rate of 1%. However, MDR will be abolished from 1 June 2024, so it’s worth considering your timeline carefully.
SDLT Surcharge for Non-UK Residents
Non-UK residents face an additional 2% SDLT surcharge when purchasing residential property in England or Northern Ireland. This applies even if you’re a UK-based company controlled by non-UK residents.
Non-Residential and Mixed Properties
The rates for non-residential or mixed-use properties (like buying a shop with a flat above it) differ from residential properties:
| Purchase Price of Property | SDLT Rate (%) |
| £0 – £150,000 | 0 |
| £150,001 – £250,000 | 2 |
| £250,001 and above | 5 |
Exemptions from SDLT
There are some exemptions where SDLT won’t apply, including:
- Properties with a value under £40,000.
- Transfers as part of a gift or inheritance.
- Transfers following a divorce.
- Transfers to a charity.
How Does SDLT Work for Leases?
SDLT on leases depends on whether it’s a new lease or an assigned lease. For new leases, SDLT applies to the upfront payment (or premium) and, if rent is paid, to the net present value (NPV) of the rent over the lease term. If either exceeds the relevant thresholds, SDLT is charged.
If you’re assigning an existing lease, SDLT works similarly to the purchase of a freehold property.
How Do I Pay SDLT?
You’ll need to complete an SDLT1 return and submit it to HMRC within 14 days of the transaction. Your solicitor or conveyancer can usually handle this for you. After filing, HMRC will send a certificate, which you’ll need for registration with the Land Registry.
How We Can Help
If you’re planning to buy property in the Nottingham area, we can help you understand the tax implications and ensure everything is handled smoothly. At AHACCOUNTANTS, we can assist you with filing the SDLT1 and submitting it to HMRC, making sure your property transaction is tax-efficient and stress-free.