Stamp Duty Land Tax (SDLT) is a tax levied by the Government on the sale of residential and commercial property and land in England and Northern Ireland. HM Revenue and Customs (HMRC) collects this tax on behalf of the Treasury.
Separate land duty is applied in Scotland through the Land and Buildings Transaction Tax, introduced in 2015 and collected by Revenue Scotland on behalf of the Scottish Government. From April 2018, the Land Transaction Tax will be levied in Wales and collected by the Welsh Revenue Authority on behalf of the Welsh Government. Different scales and percentages are applied in both Wales and Scotland.
First-time buyers in England and Northern Ireland are exempt from paying SDLT on the first £300,000 of a property transaction. Read more about exemptions below.
When the purchase price of the land or property you are buying is less than £125,000, there is no SDLT to pay. Above £125,000, the duty is levied on a sliding scale. The current rates are:
(%of total purchase price)
|Up to £125,000||0%|
|The next £125,000 (up to £250,000)||2%|
|The next £675,000 (up to £950,000)||5%|
|The next £575,000 (up to £1,500,000)||10%|
First-time buyers in England and Northern Ireland don’t pay SDLT on the first £300,000 of any property transaction with 5% levied on the remainder of any purchase up to £500,000.
Where a purchase price is more than £500,000, the first-time buyer exemption does not apply.
You don’t have to pay SDLT if, for example, you are left property in a will or a property is transferred because of divorce or dissolution of a civil partnership. There are other instances where SDLT exemptions or relief apply, including Right to Buy properties and compulsory purchases. More information can be found on the HMRC website.
Stamp Duty “mitigation” is a way of avoiding paying the tax due on a property purchase, and there are schemes that offer buyers the opportunity to “mitigate” or reduce their tax bill. However, HMRC has warned that “where HMRC find property sale arrangements that have been artificially structured to avoid paying the correct of SDLT, these will be actively challenged, through the courts where appropriate”. And the Solicitors Regulation Authority, which oversees the regulation of law firms, has said it will “look very closely at the conduct of any firm that is actively involved in these schemes”. Any buyer considering a stamp duty mitigation scheme should be aware
HMRC may consider that they are committing tax fraud.
When your property purchase is complete, a Stamp Duty Land Tax return must be completed and the outstanding duty paid to HMRC. In most cases, your solicitor or specialist conveyancer will fill in the return on your behalf and make the payment. You will need to sign the completed form so do make sure you check all the information is correct before you sign it.
The return must be submitted within 30 days of your transaction completing and the duty paid within the same period or you will have to pay a penalty.
- Stamp Duty Land Tax return submitted within 30 days of the purchase being completed
- The outstanding SDLT must also be paid within those 30 days
- Your solicitor can submit the form electronically with your authorisation and pay the duty
- Once paid, HMRC will issue an SDLT5 certificate to your solicitor
- The SDLT5 certificate is used to register the property in your name at HM Land Registry