Who pays the tax?
SDLT is payable by the purchaser in a land transaction.
What is a land transaction?
A transaction will trigger liability if it involves the acquisition of an interest in land in the United Kingdom. This will include a simple conveyance of land such as buying a house, creating a lease or assigning a lease.
When is the tax payable?
The tax has to be paid when a contract has been substantially performed. In cases where the purchaser takes possession of the property on completion that will be the date. However, if the purchaser effectively takes possession before completion – known as ‘resting on contract’ – that will be regarded as triggering the tax.
How much tax is payable on residential property?
From 4 December 2014 onwards each SDLT rate will only be payable on the portion of the property value which falls within each band. The government believe this will remove the distortion created by the previous system, where the amount of tax due jumped at the thresholds.
The current rates and thresholds are:
| Residential property
Purchase price of property |
Rates paid on the part of the property price within each tax band (%) |
| £0 – £125,000 | 0 |
| £125,001 – £250,000 | 2 |
| £250,001 – £925,000 | 5 |
| £925,001 – £1,500,000 | 10 |
| £1,500,001 and over | 12 |
Additional residential properties
The government has announced that higher rates of SDLT will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes, from 1 April 2016. The higher rates will be three percentage points above the current SDLT rates.
What about non-residential and mixed property?
The rates for non-residential and mixed property are set out in the table below. SDLT is charged at a single percentage of the price paid for the property, depending on the rate band within which the purchase price falls. The whole of the price is taxed at the appropriate rate:
| Non-residential and mixed | Rate % |
| £0 – £150,000 | 0 |
| £150,001 – £250,000 | 1 |
| £250,001 – £500,000 | 3 |
| £500,001 and over | 4 |
Broadly speaking, ‘residential property’ means a building that is suitable for use as a dwelling. Obviously it includes ordinary houses. Buildings such as hotels are not residential.
Land and Buildings Transaction Tax
Land and Buildings Transaction Tax (LBTT) is payable on land and property transactions in Scotland with an effective date on or after 1 April 2015.
| Residential property | Rate % |
| £0 – £145,000 | 0 |
| £145,001 – £250,000 | 2 |
| £250,001 – £325,000 | 5 |
| £325,001 – £750,000 | 10 |
| £750,001 and over | 12 |
| Non-residential | Rate % |
| £0 – £150,000 | 0 |
| £150,001 – £350,000 | 3 |
| £350,001 and over | 4.5 |
The Scottish government has LBTT calculators which work out the amount of LBTT payable. The calculators can be found at https://www.revenue.scot/land-buildings-transaction-tax/tax-calculators
The rates apply to the portion of the total value which falls within each band in respect of transactions with an effective date on or after 1 April 2015. For transactions prior to 1 April 2015 see Stamp Duty Land Tax.
More than one dwelling
There is a relief available for purchasers of residential property who acquire interests in more than one dwelling. Where the relief is claimed the rate of SDLT is determined not by the aggregate consideration but instead by the mean consideration (ie by the aggregate consideration divided by the number of dwellings) subject to a minimum rate of 1%.
Are there any exemptions?
Yes. There are a number of situations in which the transfer of land will not be caught for SDLT. These include:
- a licence to occupy
- a gift of land
- transfers of land in a divorce
- transfer of land to a charity
- transfers of land within a group of companies.
What is the tax charged on?
Tax is chargeable on the consideration. This will usually be the actual cash that passes on the sale. However the definition is very wide and is intended to catch all sorts of situations where value might be given other than in cash. For example if the purchaser agrees to do certain work on the property.
You mentioned that leases are caught. How does the tax work on them?
If an existing lease is purchased, SDLT is calculated in the same way as the purchase of a freehold property. If a lease is created for the payment of a premium ie a lump sum in addition to any rent, then the amount of the premium is the consideration subject to SDLT and is also calculated in the same way as the purchase of a freehold property.
However, there is also a potential charge to SDLT on the rental element. The calculation takes account of various factors including the rent that will be paid under the lease. If the calculated value exceeds £125,000 for residential property and £150,000 for non-residential, the excess is charged at 1%.
The government has SDLT calculators which work out the amount of SDLT payable. The calculators can be found at https://www.gov.uk/stamp-duty-land-tax-calculators
How do I tell HMRC about a liability?
The purchaser must complete an SDLT1 return and this must be submitted to a special HMRC office within 30 days of the transaction. You must also send a cheque for the tax at the same time so this means that you have to calculate the tax due. A late return triggers an automatic penalty of £100, and late payment of the tax will mean a charge to interest.
What will HMRC do then?
A certificate will be sent to you to show that you have paid the tax. You will need this in order to change the details of the property ownership at the Land Registry. The fact that HMRC has given you the certificate does not mean your calculations are agreed. HMRC has nine months in which to decide whether or not to enquire into your return and challenge your figures.
How we can help
If you are planning to enter into an arrangement to purchase land, we can advise you of the precise impact of SDLT on the transaction so please contact us. We can also help you complete the SDLT1 and submit it to HMRC.
