Stamp Duty and Land Tax

Contrary to popular belief stamp duty is not a single tax. Rather, it is a collection of different duties, each of which is levied in different circumstances. Stamp Duty is likely to be charged on land transactions, grants of leases, and the transfer of some other assets, most notably shares. The purchaser is liable to pay stamp duty, and the amount they will be required to pay is calculated with regard to the amount paid or the cash value of the payment if it was not cash in the first place.

Stamp duty land tax (SDLT) is one form of stamp duty. It applies to transactions in houses, flats and other buildings and land in the UK. In certain circumstances, it also applies to some leases.

Rates of SDLT

The rates at which SDLT is payable vary depending on the type of transaction. This article will look first at transactions in which land or buildings are purchased. In these cases, there is a minimum tax threshold; if the value of the land or building being purchased falls below this threshold then no SDLT will be payable. Currently this figure is set at £125,000 for residential property, and £150,000 for non-residential or mixed-use property. After this, SDLT is divided into bands of 1% (for transactions with a value up to £250,000), 3% (for transactions with a value up to £500,000), 4% (for transactions with a value over £500,000), 5% (for transactions over £1 million) and 7% (for transactions over £2 million).

It should also be noted that there are a number of forms of Tax Relief available against SDLT. The government has recently introduced SDLT relief on properties that are bought in so-called 'disadvantaged areas'. This applies only to residential property acquisitions, and offers complete relief from SDLT on transactions of this kind with a value of less than £150,000.

The government has also introduced SDLT relief on zero-carbon homes. In order to qualify for this form of relief, the home in question must generate as much energy as it uses, and the transaction must have a value of less than £500,000.

SDLT and Leases

The rules regarding SDLT and leases are more complex. Essentially, SDLT may be charged on any transaction in which a lease is granted and rents form a part of (or all of) the consideration. Regardless of the terms of the transaction, any lease with rent of any value that is being transferred for a term of seven years or more must be notified to HM Revenue & Customs (HMRC). If the term of the lease is less than seven years, HMRC must be notified if SDLT will be payable at a rate of 1% or more.

When notifying HMRC you must complete form SDLT1, which is a land transaction return. This must be completed and returned within 30 days of the actual date of the transaction, and you should ensure that you also make payment of any SDLT liability within this time. The relevant forms can be acquired from your Tax Office, but the entire process can also be carried out online. The major benefit of this is that you will receive an instant certificate of confirmation.