SDLT (often just referred to as Stamp Duty) is a form of taxation that applies to freehold or leasehold property which is purchased or transferred in exchange for payment. The purchaser or recipient of the property is required to pay the relevant amount of Stamp Duty to HMRC within 14 days of completing the purchase, as well as submitting an SDLT return. Even if no tax payment is due, the SDLT return must still normally be submitted. Late returns can incur penalties of up to 30% of the duty (see GOV.UK for further information).
This information only applies in England and Northern Ireland.
Any property or land purchased in England or Northern Ireland over a certain price is subject to Stamp Duty Land Tax (SDLT). In Scotland, SDLT has been replaced by Land and Buildings Transaction Tax (LBTT). In Wales, property or land is subject to Land Transaction Tax.
What is stamp duty?
What is the Government's stamp duty holiday?
A stamp duty holiday, with reduced SDLT rates, applied between 8 July 2020 and 30 June 2021. Between 1 July and 31 September 2021, a tapered transition back to the usual SDLT is in place, with the 0% threshold applying to transactions of up to £250,000 only returning to a £125,000 threshold from 1 October 2021.
SDLT rates on residential property
From 1 July 2021 until the end of September, a tapered transition back to the usual nil rate band for SDLT applies. The nil rate band (ie SDLT charged at 0%) will apply to transactions of up to £250,000 only returning to a £125,000 threshold from 1 October 2021.
This means that you will only pay SDLT on the amount that you pay for the property above £250,000. These rates apply whether you are buying your first home or have owned property before. Between 1 July and 30 September 20201, these rates are as follows:
any proportion of up to £250,000 = 0%
any proportion between £250,001 and £925,000 = 5%
any proportion between £925,001 to £1.5 million = 10%
any proportion above £1.5 million = 12%
SDLT rates for additional properties
Where you are buying your second property, an additional 3% charge applies in addition to the reduced rates set out above. Under the tapered transition back to the usual nil rate band for SDLT, between 1 July and 30 September 2021, the nil rate band (ie SDLT charged at 0%) will apply to transactions of up to £250,000 only returning to a £125,000 threshold from 1 October 2021.
This means that between 1 July and 30 September 20201, these rates are as follows:
any proportion of up to £250,000 = 3%
any proportion between £250,001 and £925,000 = 8%
any proportion between £925,001 to £1.5 million = 13%
any proportion above £1.5 million = 15%
How much stamp duty will I pay if I am buying my first home?
Please note that a tapered relief applies between 1 July and 30 September 2021. On 1 October 2021, SDLT rates will revert to the rates set out below.
If you are buying your first home you can claim first-time buyer relief on stamp duty land tax. You will qualify for this tax relief if you are:
- buying your first home, and
- completing your house purchase on or after 22nd November 2017, you will qualify for this tax relief.
You don't have to pay any tax if the house price is up to £300,000 and only 5% on the portion from £300,001 to £500,000. If your new house price is over £500,000 the rules set out below apply.
What are the stamp duty residential property rates if I am buying my second home or my first property price is over £500,000?
Please note that a tapered relief applies between 1 July and 30 September 2021. On 1 October 2021, SDLT rates on residential property will revert to the rates set out below.
Currently, the SDLT threshold stands at £125,000 for residential properties and £150,000 for non-residential properties. Property which is purchased for less than this price (or is worth less than this amount if it is being transferred in exchange for payment) is not liable for SDLT. The current rates are as follows:
- any portion of up to £125,000 = 3%
- any portion of £125,001 to £250,000 = 5%
- any portion of £250,001 to £925,000 = 8%
- any portion of £925,001 to £1.5 million = 13%
- any portion above £1.5 million = 15%
These rates apply both to sales and transfers of freehold property and also to the purchase price of the lease (called the premium) in respect of leasehold properties.
Example: Frank buys a house for £350,000. He pays 3% SDLT on the first £125,000 = £3,750. He pays 5% of the next £125,000 = £6,250. He pays 8% on the next £100,000 = £8,000. So in total Frank must pay £3,750 + £6,250 + £8,000 = £18,000.
A higher rate of SDLT is normally payable in respect of purchases of additional residential properties; this is usually 3% above the normal SDLT rates.
What happens if I sell my main residence and move into the second property as my main residence?
If you buy a new main residence but there’s a delay in selling your previous main residence, you’ll have to pay the higher Stamp Duty rates as you’ll own two properties.
Where you sell or give away your previous main residence within 3 years of buying your new residence, you can apply for a refund of the higher SDLT rate you paid.
You must apply for any repayment within 12 months of the sale of your old main residence.
What if property is being bought by non-UK residents?
From 1 April 2021, a 2% SDLT surcharge applies where non-UK residents buy property (regardless of whether they already own property).
This surcharge applies across all SDLT rates and is separate from the 3% SDLT surcharge that applies to second homes and additional residential property purchases. This means that the top SDLT rates will increase to a maximum of 17% for some non-UK resident buyers.
For the purposes of SDLT, a non-UK resident is someone who is not present in the UK for at least 183 days (ie 6 months) during the 12 months before the property purchase.
What happens when property is transferred or left in a will?
There is generally no stamp duty to pay in respect of inherited property which has been left in a will.
Property which is transferred as a gift is liable for stamp duty if there is an outstanding mortgage; SDLT will be applied to the value of the remaining mortgage.
For stamp duty liability on other types of property transfer, see GOV.UK.
How does stamp duty affect shared ownership property?
When purchasing a shared ownership property (eg with a housing association or local housing authority), there are two options available for paying SDLT:
- Market value election - stamp duty is paid based on the total value of the property, which covers any future additional equity share purchased.
- Staged payment - this involves an initial SDLT payment on the premium if it falls above the threshold. There is an additional 1% SDLT payment if the total rent over the life of the lease (called the 'net present value') is over £125,000. Please note: between 1 July and 30 September 2021, this 'net present value’ must be above £250,000 to attract the additional 1% SDLT.
For more information on stamp duty and shared ownership, see GOV.UK.
Are there any exemptions?
Normally, even if SDLT does not need to be paid because the price of a property falls below the threshold, a SDLT return must still be filed. However, there are certain situations in which neither SDLT needs to be paid nor does a return need to be filed, including:
- a freehold property is purchased for less than £40,000
- property is transferred due to divorce
- property is left in a will
- no money or payment changes hands (ie the property is a gift)
- property is transferred because of divorce or dissolution of a civil partnership