Stamp duty


A commercial building attracting stamp dutyStamp duty land tax (SDLT) is payable on property and land purchases above set SDLT thresholds. The buyer pays stamp duty, which usually applies to both freehold and leasehold transactions

Because SDLT can significantly increase purchase costs, it may be worth investigating any stamp duty planning opportunities when considering a property purchase. From 22 November 2017, qualifying first-time buyers benefit from stamp duty relief. The relief was extended on 29 October 2018 to all purchasers of qualifying shared-ownership properties. The relief has also been back-dated to 22 November 2017 so that eligible shared-ownership property purchasers who have not yet claimed can claim a refund.

What is stamp duty?

Stamp duty land tax (SDLT) is a self-assessed, compulsory tax payable by buyers on most property transactions in England, Norther Ireland and Wales (equivalent of Land and Buildings Transaction Tax, LBTT, in Scotland; from April 2018 Wales replaced Stamp duty with Land and Building Tax, LBT).

Stamp duty is payable on property and land purchases or transfers above set SDLT thresholds and applies to both freehold and leasehold transactions. Most property transactions must be reported to HM Revenue & Customs (HMRC) even if SDLT is not payable.

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How is stamp duty calculated?

SDLT for both commercial and residential property is charged on the purchase price. It is calculated on the proportion of a property's value in each tax band.

SDLT is not payable on the price of commercial properties up to £150,000 and up to £125,000 for residential properties.

From 22 November 2017, SDLT has been abolished for first-time buyers of residential property on homes where the purchase price is £300,000 or less. The relief was extended to first-time buyers of qualifying shared-ownership properties. First-time buyers of qualifying properties who paid stamp duty on or after 22 November 2017 can claim a refund.

On homes worth up to £500,000 first-time buyers only pay SDLT at 5% on the portion between £300,001 and £500,000. For properties worth over £500,000 the rules are the same as for people who have previously bought a home.

Amounts paid over the initial stamp duty-free bands are calculated on the amount of purchase price falling within each tax band.

For example, if a commercial property was purchased for £185,000, there would be nothing to pay on the first £150,000 and 2% SDLT would be payable on the remaining £35,000.

The way SDLT is paid has not changed.

You can use the Stamp Duty Land Tax Calculator on the GOV.UK website to work out how much SDLT is payable under the new SDLT regime.

Stamp duty on commercial property

Stamp duty land tax (SDLT) applies to commercial properties and land purchases and transfers. Tables below provide the details of the current SDLT tax bands and rates.

Freehold Non-residential (Commercial property) Stamp Duty Land Tax rates

Purchase price (non-residential or mixed use)

SDLT rate paid on the property amount within each tax band

Up to £150,000

0%

Between £150,001 and £250,000

2%

Over £250,000

5%

Leasehold Non-residential (Commercial property) Stamp Duty Land Tax rates

When you buy a leasehold property, you pay SDLT on both the lease purchase price and on the value of any annual rent payable. In addition to the rates in the table above, you will also have to pay SDLT calculated using the rates below.

If you buy an existing 'assigned' lease, you are only liable to SDLT on the lease price using the rates below.

Value of rent (non-residential or mixed use)

SDLT rate paid on the property amount within each tax band

Up to £150,000

0%

Portion between £150,001 and £5,000,000

1%

The portion over £5,000,000

2%

Residential Stamp Duty Land Tax rates

Purchase price/lease premium or transfer value

SDLT rate paid on the property amount within each tax band

Up to £125,000 (or up to £300,000 for first-time buyers, including those buying shared-ownership properties, completing on or after 22 November 2017)

0%

Between £125,001 - £250,000

2%

Between £250,001 - £925,000 (or the portion between £300,001 - £500,000 for first time buyers completing on or after 22 November 2017)

5%

Between £925,001 - £1.5 million

10%

Over £1,500,001

12%

Stamp duty on second property

There are higher rates of SDLT which apply where a person is purchasing an additional residential property or 'second home' - such as a holiday home or buy-to-let investment. The rate of SDLT is three percentage points above the rates for residential properties listed above.

For example, if a second residential property was purchased as a holiday cottage which cost £240,000, SDLT of 3% would be charged on the purchase price up to £125,000 and 5% SDLT would be payable on the remaining £115,000 of the purchase price.

Stamp duty land tax planning

Stamp duty land tax is based on the purchase price of the land and property. Separating out anything else included in a transaction - such as machinery, furniture or carpets - will reduce the taxable price on which SDLT is payable. If this reduction means the price falls into a lower SDLT band, the SDLT payable will also be charged at a lower percentage.

At the same time, you may want to use the opportunity to identify which items will qualify for capital allowances to be set against income tax or corporation tax.

It may be possible to reduce or eliminate SDLT on larger transactions, using complex SDLT mitigation schemes. You should take specialist advice, because HMRC may look to challenge any reduction in the SDLT paid.

You can find more detailed information on SDLT on the GOV.UK website.

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