Stamp duty land tax

What is stamp duty land tax?

Generally, you pay Stamp Duty Land Tax (SDLT) when you purchase or transfer property or land in England and Northern Ireland. The amount you pay depends on various factors, such as when you bought the property, how much you paid for it, and whether you’re eligible for relief or an exemption.

These property and land transactions must be notified to HMRC on an SDLT return – even if no tax is due.

Usually, the effective date of the transaction for SDLT purposes is treated as the date of completion, which is important for determining the amount of SDLT payable.

SDLT Rates for Residential Property

Given the extensive scope of SDLT, this article will concentrate on residential properties. Please note that there are different SDLT rules and rates for:

·         Corporate bodies

·         People buying 6 or more residential properties in one transaction

·         Shared ownership properties

·         Multiple purchases or transfers between the same buyer and seller

·         Companies and trusts buying residential property

Prior to the Autumn Budget 2024

In September 2022, we saw the government cut SDLT to support the housing market, by lowering the upfront costs of moving home and supporting those looking to get on and up the housing ladder.

The standard rates were still increased by 3% where the purchase is of an additional residential property for £40,000. This is subject to the person not replacing their only/main residence.

In addition to increasing the SDLT thresholds, First Time Buyers’ Relief was also increased from £300,000 to £425,000.

However, this was only a temporary increase which was only intended to remain in place until 31 March 2025.

Please note, certain types of non-natural persons acquiring residential properties costing more than £500,000, will have to pay a single rate of SDLT at 15% – in this case the additional 3% rates outlined above did not apply.

Current position

The Autumn Budget 2024 announcement introduced changes to the SDLT, increasing rates for purchasers of additional dwellings and companies from 3% to 5% above the standard rates.

Additionally, the government also increased the single rate of SDLT payable by certain companies and non-natural persons acquiring dwellings for more than £500,000 from 15% to 17%.

Both changes applied to transactions with an effective date on or after 31 October 2024.

On top of the aforementioned changes, the temporary increase to SDLT thresholds ended on 31 March 2025.

Therefore, if you were to acquire a second property as an individual prior to the Autumn Budget for £250,000 you would be paying £7,500 in SDLT. In comparison if you were to complete the same transaction on or after April 2025, you would be paying £15,000 for SDLT.

Other considerations

Non-residential surcharge

Where a non-resident (individual or a company) purchases a residential property, there will be an extra 2% surcharge on top of the rates that apply to the transaction. There are a couple of scenarios where the additional surcharge may not apply.

First-time buyer’s relief

After 31 March 2025, you can claim first-time buyer’s relief for individuals purchasing their first house, you will pay no SDLT up to £300,000.

You will pay 5% SDLT on the portion from £300,001 to £500,000. However, if the purchase price is greater than £500,000, you will not be able to claim the relief.

Exemptions

Usually a land transaction is a chargeable transaction for SDLT purposes. However, there are exemptions:

a.       Transactions where there is no chargeable consideration (i.e. gifts);

b.       Transactions in connection with divorce; and

c.       Variations of Wills etc after death

In addition, there is potentially no SDLT return is required if an exemption applies.

Chargeable consideration

Although gifts of land and property are usually exempt from SDLT, careful consideration must be given as there may be deemed consideration, whether directly or indirectly, such as the assumption of an existing debt by the purchaser – typically a mortgage.

Other types of chargeable consideration include, carrying out works on land and provision of services.

As mentioned previously, the rate of tax can vary according to whether the property is in residential, non-residential use, or a mixture of both. Additionally, the rate can depend on whether the property being acquired is a freehold or leasehold. Because of this, navigating through SDLT can be incredibly complex. That’s why we suggest that you speak to a professional if you’re unsure of your SDLT liability or reporting obligations.