Stamp Duty Land Tax

Why is understanding SDLT important?

1. Legal Requirement: Paying SDLT is a legal obligation. Failure to pay on time can result in penalties and interest charges, making it crucial for buyers / tenants to understand and comply with this requirement.
2. Budgeting for Buyers: Knowing about SDLT helps buyers / tenants budget accurately for their property transaction. It’s an additional cost that needs to be budgeted for, alongside the property price, legal fees, and other expenses.
3. Reliefs and Exemptions: Understanding available reliefs, such as those for first-time buyers can lead to significant savings.
4. Transaction Timing: The timing of property transactions can affect SDLT liability. For example, first-time buyer relief might only apply if the transaction is completed within a certain timeframe. Timing can therefore influence the viability of property transactions and development projects.

Current Thresholds

Commercial and mixed use Property – Freehold and/or the purchase of an existing lease

• £0 – £150,000: 0%
• The portion from £150,001 – £250,000: 2%
• The portion from £250,000: 5%

Commercial and mixed use Property – New Leasehold

• £0 – £150,000: 0%
• The portion from £150,001 – £5,000,000: 1%
• The portion from £5,000,000: 2%

On the grant of a new lease, SDLT is payable on the lease premium (ie the purchase price of the lease) and also the net present value (NPV) of the rent. The NPV of the rent is a calculation that shows how much a series of future rent payments are worth in today’s money. It adjusts the future payments to their present value by considering the time value of money, using a discount rate.

Residential Property (up to 31 March 2025)

• £0 – £250,000: 0%
• The portion from £250,001 – £925,000: 5%
• The portion from £925,001 – £1.5 million: 10%
• The portion from £1.5 million: 12%

Residential Property (from 1 April 2025)

• £0 – £125,000: 0%
• The portion from £125,001 – £250,000: 2%
• The portion from £250,001 – £925,000: 5%
• The portion from £925,001 – £1.5 million: 10%
• The portion above £1.5 million: 12%

Higher Rates

1. Additional Property: If the acquisition of a residential dwelling means you will end up owning more than one, you will usually have to pay an additional rate of 5% on top of those rates set out above. There are however a number of reliefs (discussed below) which may be available to you that may reduce the overall liability to SDLT.
2. Non-UK resident: If you’re not present in the UK for at least 183 days (6 months) during the 12 months before your purchase you are ‘not a UK resident’ for the purposes of SDLT.

For more detailed calculations or specific scenarios, you can use the HMRC SDLT calculator which can be found online at https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#!/holding.

Important Points

• Filing Requirements: SDLT must be paid within 14 days of completion.
• Filing Requirements: An SDLT return must be filed even if no SDLT is due where the purchase price / lease premium is £40,000 or more.
• Thresholds: where the transaction is subject to VAT (whether on the purchase price, premium or annual rent), this figure must be included when calculating the NPV of the rent.
• Reliefs and exemptions are available for specific types of property transfers as explained in more details below.

SDLT Relief:

There are several reliefs available for SDLT in the UK which can reduce the amount of tax you need to pay. Here are some of the main reliefs:

1. First-Time Buyers’ Relief:

Residential Property (up to 31 March 2025)

• Up to £425,000: 0%
• The portion from £425,001 – £625,000: 5%

If the purchase price exceeds £625,000, it is not possible to claim first time buyer’s relief.

Residential Property (from 1 April 2025)

• Up to £600,000: 0%
• £300,001 – £500,000: 5%

If the purchase price exceeds £500,000, it is not possible to claim first time buyer’s relief.

2. Charities Relief:
Charities can claim relief from SDLT when they buy property for charitable purposes. This helps reduce the cost of acquiring property for their operations.

3. Group Company Relief:
Companies transferring property to another company within the same group may be eligible for SDLT relief.

4. Freeport Tax Sites:

You can claim relief from Stamp Duty Land Tax when buying any land or buildings in a designated Freeport tax site if the land or buildings will be used for commercial or business purposes.

Exemptions

There are also several exemptions where no SDLT is payable, such as:

• Transfers of property due to divorce or dissolution of a civil partnership;
• Property left in a will; and
• Gifts of property where no mortgage is involved.