Stamp Duty Land Tax rates and thresholds
Stamp Duty Land Tax (SDLT) is charged on land and property transactions in the UK. It 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 varies 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.
SDLT and Stamp Duty rates up to September 2008
SDLT rates for residential property
The table below applies for all freehold residential purchases and transfers and the premium paid for a new lease or the assignment of an existing lease. (If the property will be used for both residential and non-residential purposes the rates differ - please see the section 'SDLT for non-residential or mixed use property'.)
New thresholds from September 2008
The £175,000 threshold shown in the table applies from 3 September 2008 until 31 December 2009 inclusive (unless the lease is for less than 21 years - see the later section on this). The new threshold means that Disadvantaged Areas Relief, previously available for properties in areas designated as 'disadvantaged', doesn't apply during this period.
New leases
If the transaction involves the purchase of a new lease with a substantial rent there may be an additional SDLT charge to that shown below, based on the rent. See the next section and the table 'SDLT on rent for new leasehold properties (residential)' for more detail.
Residential land or property SDLT rates and thresholds
| Purchase price/lease premium or transfer value | SDLT rate |
|---|---|
| Up to £175,000 (until 31 December 2009 - see note above) | Zero |
| Over £175,000 to £250,000 | 1% |
| Over £250,000 to £500,000 | 3% |
| Over £500,000 | 4% |
If the value is above the payment threshold, SDLT is charged at the appropriate rate on the whole of the amount paid. For example, a house bought for £180,000 is charged at 1 per cent on £180,000, so £1,800 must be paid in SDLT. A house bought for £350,000 is charged at 3 per cent, so SDLT of £10,500 is payable.
Special rules for residential leases of less than 21 years
The temporary SDLT threshold of £175,000 for residential property transactions does not apply to:
- the assignment of an existing lease which has less than 21 years to run
- the grant of a lease for a term of less than 21 years
In these cases the normal thresholds of £125,000 (£150,000 if the property is situated in a disadvantaged area) apply.
Properties bought in a disadvantaged area
Disadvantaged Areas Relief (whereby residential properties bought in areas designated by the government as 'disadvantaged' had a higher SDLT threshold of £150,000) will not apply for residential only property purchases between 3 September 2008 and 31 December 2009 . Instead the SDLT threshold will be the same as for all other residential property. The only exception is where the lease is for less than 21 years - as described earlier.
Some property transactions in a disadvantaged area may have both residential and non-residential parts - eg a shop with a flat above. In this case the temporary £175,000 threshold between 3 September 2008 and 31 December 2009 does not apply. For SDLT purposes, the property value is apportioned on a fair and reasonable basis between the two uses. If the amount attributed to the residential element does not exceed £150,000 then Disadvantaged Areas Relief will apply to that element and a separate £150,000 threshold applies to the non-residential element.
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 .
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 threshold depends on the length of the lease.
| Net present value of rent - residential | SDLT rate |
|---|---|
| £0 - £175,000 | Zero |
| Over £175,000 | 1% of the value that exceeds £125,000 |
If the NPV exceeds £175,000 tax is due at 1% on the excess over the normal £125,000 threshold not the new temporary level of £175,000
For example, if the NPV of the rent on a new residential lease totals £200,000, then the SDLT on this rent is 1% of £75,000, or £750. This charge is then added to the SDLT charged on the premium paid for the new lease, shown in the previous table.
Different rates apply for mixed use purchases - see the later section on this.
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 |
|---|---|
| Up to £150,000 - annual rent is under £1,000 | Zero |
| Up to £150,000 - annual rent is £1,000 or more | 1% |
| Over £150,000 to £250,000 | 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)
Generally, SDLT presents few problems, but there are some odd quirks to watch out for:
Transfers to a company
When land is transferred to a company, even if it is transferred for no payment, SDLT is charged on the market value of the land, in either of the following situations:
- The person transferring the land is “connected” with the company, or
- The company issues shares to the transferor in exchange for the land
Mortgages
Where a property is mortgaged, if it (or a share in it) is gifted to another person, they are deemed to take over their share of the mortgage, and that is “valuable consideration” for SDLT purposes. For example, if Mr A owns a buy to let property worth £400,000, on which there is a mortgage of £300,000, and he gives a half share in the property to his wife, there is no CGT to pay because gifts between spouses are free of CGT, but his wife will have to pay SDLT. Having taken over half the mortgage (£150,000), she is deemed to have “paid” that for her half share in the house, and SDLT at 1% (£1,500) is due.
Linked transactions
This is a typical piece of anti-avoidance legislation, in that it is designed to attack one form of abuse, but has the side effect of producing unfair results.
First, the abuse. If I want to buy a house costing £300,000, the SDLT will be £9,000 (at the 3% rate). But what if the vendor sells me the house for £250,000 (SDLT at 1% of £2,500), and sells the garden to my wife for £50,000 (no SDLT as it is below the threshold of £125,000)?
Unfortunately, because these two transactions are “linked” – they are part of the same bargain and the two purchasers are “connected” with each other – the rule says you must add the consideration for each transaction together, and then everyone must pay SDLT at the rate for the total – so in this case I pay £7,500 (3%) and my wife pays £1,500 (also at 3%).
That is fair enough, as the splitting of the sale was merely a trick to avoid SDLT, but consider this case:
Jack and Jill each own a flat, and by coincidence their flats are each worth exactly the same - £200,000. Jack’s flat is in Manchester, and Jill’s in Birmingham. They have never met, but they work for the same large organisation. One day, Jack gets transferred to Birmingham, and Jill gets a transfer to Manchester. They advertise their flats in the company magazine, and eventually agree to do a straight swap. For SDLT purposes, the “consideration” in each case is the value of the house swapped, so they each pay SDLT of £2,000 (the 1% rate).
If the facts were exactly the same, except that Jack was married to Jill’s sister, Jack and Jill would be “connected” and so the two transactions would be “linked”. This in turn means that the total consideration for the two transactions must be used to decide the rate of SDLT. The total is £400,000, which is in the 3% band, so Jack and Jill each have to pay SDLT of £6,000 (£200,000 at 3%).
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