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Stamp Duty – What is Stamp Duty Land Tax?

Stamp Duty, officially known as Stamp Duty Land Tax or SDLT, is a tax on the purchase of land or property.

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Stamp Duty Land Tax is applicable in England and Northern Ireland. In Scotland, there is a similar tax called Land and Buildings Transaction Tax (LBTT). In Wales, Land Transaction Tax (LTT) came into effect on April 1st 2018.

You will be charged SDLT if you or your company:

  • Purchase a freehold property
  • Purchase a new or leasehold property
  • Purchase a property through a shared ownership scheme
  • Transfer land or property in exchange for payment.

Stamp Duty and residential properties

Stamp Duty is due on residential properties worth £125,000 or more, and the amount you pay depends on the value of the property. Stamp Duty is charged in the following intervals:

  • Below £125,000: 0%
  • £125,001 to £250,000: 2%
  • £250,001 to £925,000: 5%
  • £925,001 to £1.5 million: 10%
  • £1.5 million and above: 12%

An additional 3% is charged on top of the standard Stamp Duty rate for any additional homes.

On November 22nd 2017, it was announced that first-time buyers would pay less (or no) Stamp Duty on houses worth £500,000 or less. If you purchase a property worth more than £500,000, you follow the normal rules. There is also a special set of rules for residential properties purchased by corporate bodies, transactions that cover 6 or more properties, and shared ownership properties.

Example of Stamp Duty on residential properties

You purchased a property worth £600,000. It is your first home, but it is over the £500,000 threshold, which means that you have to pay the standard rates.

You would pay nothing on the first £125,000, 2% on the next £125,000 (£2,500), then 5% on the remaining £350,000 (£17,500). You would pay a total of £20,000 in Stamp Duty.

Stamp Duty and commercial properties

For ‘non-residential’ or ‘mixed-use’ properties, Stamp Duty is charged in the following intervals.

  • Below £150,000: 0%
  • £125,001-£250,000: 2%
  • £250,001 and above: 5%

‘Non-residential’ property includes:

  • Commercial property such as shops and offices
  • Agricultural land and forests
  • Six or more residential properties which are purchased in one transaction
  • Any other land or property that is not used for residential purposes.

‘Mixed-use’ property is used for both residential and non-residential purposes. For example, a building which has flat above a shop.

Example of Stamp Duty on commercial properties

You purchased an office worth £400,000. You would pay nothing on the first £125,000, 2% on the next £125,000 (£2,500), then 5% on the remaining 150,000 (£7,500). You would pay a total of £9,000 in Stamp Duty.

Stamp Duty Reserve Tax

Although they have similar names, Stamp Duty Land Tax should not be confused with Stamp Duty Reserve Tax (SDRT), a tax changed on the electronic purchase of shares.

SDRT is due on paperless transactions for:

  • Shares in a UK-based company
  • Shares in a company based in another country, with a share register in the UK
  • Interest on the profit made from selling shares.

Stamp Duty Land Tax and Debitoor

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