Stamp Duty

If you buy land or property in the UK over a certain purchase price you have to pay Stamp Duty Land Tax (SDLT). The tax is charged at different rates and has different thresholds for different types of property and different values of transaction. The tax rate and payment threshold can vary according to whether the property is in residential or non-residential use, and whether it is a freehold or leasehold. SDLT relief is available for certain kinds of property or transaction.
  

What is Stamp Duty Land Tax?

 
SDLT replaced Stamp Duty in December 2003 and is a tax on the purchase price of land and buildings. When you buy a property or take on a lease you may have to pay SDLT.
  

Paying SDLT

 
If you buy either a freehold or a leasehold property and the purchase price is more than £125,000, you pay SDLT of between one and four per cent* of the whole purchase price. See the table below for more detail.
 
If the purchase price is £125,000 or less you don’t pay any SDLT.
 
The £125,000 threshold for when you start to pay SDLT was introduced again on 1 January 2010.
  

First-time buyers

 
If you are a first-time buyer the threshold for when you start to pay SDLT is £250,000. This is only if you have never owned a house or flat in the UK or anywhere else in the world. If you are buying with someone else they must never have owned property before either. This higher threshold applies to purchases made on, or after, 25 March 2010 and before 25 March 2012.
  

Residential land or property SDLT rates and thresholds

 

Purchase price of residential property Rate of SDLT (percentage of the total purchase price) Rate of SDLT – first-time buyers (percentage of the total purchase price)
£0 – £125,000 0% 0%
£125,001 – £250,000 1% 0%
£250,001 – £500,000 3% 3%
£500,000 to £1,000,000 4% 4%
*Over £1 million 5% 5%

  
*From 6 April 2011 SDLT on residential properties over £1 million is charged at 5%. It does not apply to non-residential or mixed-use properties. There are some transitional arrangements for contracts which were entered into before 25 March 2010 but not completed by 6 April 2011 in most of these cases the new rate will not apply.
  

Properties bought in a disadvantaged area

 
If the property is in an area designated by the government as ‘disadvantaged’ a higher threshold of £150,000 applies for residential properties.
  

Purchase price/lease premium or transfer value SDLT rate SDLT rate for first-time buyers
Up to £150,000 0% 0%
Over £150,000 to £250,000 1% 0%
Over £250,000 to £500,000 3% 3%
Over £500,000 to £1,000,000 4% 4%
*Over £1 million 5% 5%

  

From 25 March 2010 up to 24 March 2012, first-time buyers can claim a relief from SDLT if the amount paid for the property is under £250,000. This relief applies whether or not the property is in an area designated as disadvantaged.
  

SDLT on rent – new residential leasehold purchase

 
When a new residential lease has a substantial annual rent, SDLT is payable on both of the following, which are calculated separately and then added together:
 
• The lease premium (purchase price) – see the table above
• The ‘net present value’ (NPV) of the rent payable
 
The NPV is based on the value of the total rent over the life of the lease and can be worked out using HMRC’s online calculator (link below). In practice SDLT only becomes payable on a fairly high rent – starting at around £4,500 a year for a 99-year lease, for example, however the exact amount depends on the length of the lease.
  

SDLT on rent for new leasehold properties (residential)

 

Net present value of rent – residential SDLT rate (includes first-time buyers)
£0 – £125,000 0%
Over £125,000 1% of the value that exceeds £125,000

  
Note that a higher threshold of £175,000 applied for rents on residential only leases taken from 3 September 2008 to 31 December 2009. Follow the link below to find out more.
  

SDLT rates 3 Sept 2008 – 21 April 2009

 
If six or more residential properties form part of a single transaction
 
If six or more properties form part of a single transaction the rules, rates and thresholds for non-residential properties apply. The amounts paid for all the properties in the transaction must be added together in order to establish the rate of tax payable.
  

SDLT rates for non-residential or mixed use properties

 
Non-residential property includes:
 
• Commercial property such as shops or offices
• Agricultural land
• Forests
• Any other land or property which is not used as a dwelling
• Six or more residential properties bought in a single transaction
 
A mixed use property is one that incorporates both residential and non-residential elements.
 
The table below applies for freehold and leasehold non-residential and mixed use purchases and transfers. If the transaction involves the purchase of a new lease with a substantial annual rent, there may be additional SDLT charge to that shown below, based on the rent. See the later section and table for more detail.>
  

Non-residential land or property rates and thresholds

  

Purchase price/lease premium or transfer value
(non-residential or mixed use)
SDLT rate(includes first time buyers)
Up to £150,000 – annual rent is under £1,000 0%
Up to £150,000 – annual rent is £1,000 or more 1%
Over £150,000 to £250,000 1%1
Over £250,000 to £500,000 3%
Over £500,000 4%

  
Note that for the above purpose the annual rent is the highest annual rent known to be payable in any year of the lease, not the net present value used to determine any tax payable on the rent as described below.
  

SDLT on rent – new non-residential or mixed use leasehold purchase

 
When a new non-residential or mixed use lease has a substantial annual rent, SDLT is payable on both of the following which are calculated separately and then added together:
 
• The lease premium or purchase price – see the table above
• The net present value of the rent payable (this is based on the value of the total rent over the life of the lease and can be worked out using HMRC’s online calculators)
  

SDLT on rent for new leasehold properties (non-residential or mixed use)

  

Net present value of rent – non-residential SDLT rate(includes first time buyers)
£0 – £150,000 0%
Over £150,000 1% of the value that exceeds £150,000

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