Stamp duty land tax
As a solicitor, it may be that you:
- advise on SDLT
- file SDLT returns
- pay the tax on your clients’ behalf and within the applicable time limits
This page provides a summary of key points only – see our legal notice.
A solicitor who does not have the necessary specialist knowledge of tax should not advise on it and may need to advise clients to obtain specialist SDLT advice, especially in relation to higher risk transactions.
In Wales, SDLT has been replaced by land transaction tax.
SDLT has become a tax with complex rules about its scope, rates and reliefs.
It's payable when a purchaser acquires a ‘chargeable interest’ in land in England or Northern Ireland.
The amount payable is based on the ‘chargeable consideration’. Often this is the price the purchaser pays for the property or land, including any fixtures and fittings.
Residential property
Where a UK resident individual buys their only residential property to occupy themselves, the thresholds and rates applicable are relatively straightforward.
For transactions with effective dates on and after 23 September 2022, if the chargeable consideration is £250,000 or under, then no SDLT is payable.
If the price is above the threshold, the purchaser must pay SDLT on the portion over £250,000.
The rate increases in bands, starting at 5% from £250,000 to £925,000 and going up to 12% for any portion above £1.5 million.
There are different rules in some circumstances for those buying their first home where the purchase price is £625,000 or less. (This threshold was increased to £625,000 from £500,000 for transactions with effective dates on and after 23 September 2022.)
From 1 April 2021, new rates of SDLT were introduced for buyers of residential property in England and Northern Ireland who are not resident in the UK.
The non-resident rates are 2% higher than rates that apply to purchases made by UK residents.
The rules for determining residence for this purpose differ from the rules for determining residence for other tax purposes.
It's possible for a buyer who is UK resident for other tax purposes to be treated as non-UK resident for SDLT purposes so that the higher 'non-resident' rates apply.
There are special rules for calculating SDLT on rents. Read HMRC’s guidance on residential property rates
Other property and certain 'high value' residential property acquisitions
There are different rules, rates and thresholds for non-residential and mixed-use property.
Read HMRC’s guidance on non-residential and mixed-use property rates
A 15% flat rate of SDLT also applies to certain 'high value' residential property acquisitions by non-individuals. This is separate from the higher rates for additional dwellings provisions explained below.
As with the ordinary SDLT rates outlined above, from 1 April 2021 the rate is 2% higher (that is, 17%) for acquisitions by non-UK residents.
Residence for this purpose is determined under specific rules that differ from those which apply for other tax purposes, so it's possible for a buyer that is UK resident for other tax purposes to be subject to the higher 'non-resident' rate.
Higher rates for additional dwellings and purchases by non-individuals
Higher rates are charged for a purchase of certain additional residential properties by an individual and for a purchase of any dwelling by a non-individual, if the chargeable consideration is £40,000 or more.
This may apply, for example, when an individual purchases a buy-to-let property or a holiday home, if the purchase means the individual will own more than one property.
The purchaser must pay 3% on top of the normal standard rates, subject to any applicable conditions, exemptions or reliefs.
From 1 April 2021, the 2% non-resident SDLT surcharge may apply on top of the higher rates for non-UK resident purchasers.
Read HMRC’s guidance on higher rates of SDLT
HMRC’s SDLT calculator
The government’s SDLT calculator may help you to work out the tax payable, but it's not suitable for use in all transactions.
A land transaction is chargeable to SDLT unless an exemption or relief applies.
Relief for first-time buyers
If the purchaser is a first-time buyer and the price of the property is £625,000 or less, they can claim first-time buyers' relief.
The buyer must be an individual and the property must be a residential property that the buyer intends to use as their main home.
They will pay no SDLT up to £425,000 and 5% on the portion from £425,001 up to £625,000.
If the chargeable consideration is more than £625,000 the purchaser cannot claim first-time buyers' relief and must pay the standard rate or, if applicable, the increased rates applicable to additional dwellings or for purchases by non-UK residents.
The thresholds described above apply for transactions with effective dates on and after 23 September 2022.
Read HMRC’s guidance on relief for first-time buyers
Other reliefs
Several other reliefs can be claimed, including for:
- purchases of multiple dwellings
- purchases by a charity of land and property for charitable purposes
- right to buy purchases
If the purchaser is buying a property through a shared ownership scheme operated by an approved qualifying body such as a housing association or local authority, they can decide to pay SDLT either:
- based on the total market value of the property – this is called a ‘market value election’, or
- just on the initial share they are buying
If they choose to pay SDLT just based on the initial share, they will need to make a further payment if they later buy additional shares that take their ownership above 80%.
The purchaser must file a land transaction return even if they do not need to pay any tax, unless the transaction is exempt from SDLT or from notification.
You may be required to do this on the purchaser’s behalf.
Exemptions
You do not have to file a return if a land transaction is exempt from SDLT, such as where there is no chargeable consideration.
A land transaction may also be exempt from notification, for example, where it's a grant of a lease for a term of less than seven years where the chargeable consideration does not exceed the zero-rate threshold.
Read HMRC’s guidance on exemptions
'Exempt' here means specifically exempted from SDLT.
In addition, various reliefs from SDLT can apply to transactions that would generally be subject to SDLT to reduce the amount payable (often to zero), but which can only be claimed by filing a return that claims the reliefs.
This means a return still needs to be filed even though the result may be that no SDLT is payable.
Deadlines
The purchaser must file the return and pay the tax within 14 days of the ‘effective date’ of the transaction.
However, you may be obliged to do this on behalf of the purchaser/buyer – for example, if their mortgagee requires it.
The ‘effective date’ is usually the completion date, but it can be the date when the contract is ‘substantially performed’ if this happens before completion – for example, if the purchaser is given possession of the property early.
Online returns
If you’re a solicitor, you will need to register to use HMRC’s Stamp Taxes Online service. Find out how to register
You can then submit SDLT returns online.
As soon as you submit the return you will receive an online SDLT5 certificate and a unique transaction reference number (UTRN).
You’ll need to send the UTRN to HM Land Registry when you make an application to register the transaction.
Paper returns
A person who is not a solicitor or conveyancer cannot file a return online and will need to send a paper return to HMRC, using form SDLT1.
It must include a valid local authority code and be signed by the purchaser.
The deadline for paying the tax is the same as the deadline for filing the return: 14 days from the effective date of the transaction.
When paying, it’s important to use the correct 11-digit UTRN and the correct HMRC bank account. This will allow HMRC to link the payment to the SDLT return.
If you filed online, the UTRN will be on the SDLT5 certificate.
If you filed a paper return, the UTRN is on the payslip at the back of the form.
There are several ways to pay. Some methods take longer than others and you’ll need to allow enough time for the payment to go through before the deadline.
Payment methods include:
- Faster Payments
- CHAPS
- BACS
- online using a debit card or corporate credit card
- at a bank or building society
- by cheque through the post
Read HMRC’s guidance on paying SDLT
Penalties and interest for late filing and non-payment
A penalty of £100 is payable for a late return, or £200 if it's more than three months late.
A tax-based penalty may also be imposed if the tax is not paid within 12 months of the filing deadline.
Interest is charged on the amount owed.
You should be aware of the anti-avoidance measures applicable to SDLT.
There are anti-avoidance rules contained in the SDLT legislation, notably the wide rules at section 75A, 75B and 75C of the Finance Act 2003 and the rules on linked transactions at section 55 of the Finance Act 2003.
There are also relevant measures outside of the SDLT legislation, including the rules of the Disclosure of Tax Avoidance Schemes (DOTAS) and the General Anti-Abuse Rule (GAAR), both of which apply to SDLT.
Read our practice note on disclosure of tax avoidance schemes
Watch out for situations not necessarily covered by the guidance above, such as:
- commercial property purchases
- purchases by non-UK residents
- purchases by companies or other non-natural persons
- linked transactions
- new leasehold sales and transfers
- if the property price is not the same as relevant consideration for SDLT purposes
- cases where multiple dwellings relief might apply
- properties with annexes, subsidiary dwellings, paddocks or fields
- shared ownership properties
- not sold old main residence when buying a new main residence
If in doubt, seek specialist advice and/or advise your client to do so.
The rules are different for properties in Wales. Read the Welsh government guidance on land transaction tax
The government regularly makes changes to SDLT which are often announced in its budget.
Changes are usually introduced through the Finance Act each year.
SDLT changes announced in the September 2022 mini budget
Two SDLT changes were announced in the chancellor's September 2022 fiscal statement.
The changes apply to transactions with effective dates on and after 23 September 2022.
First, the government increase the nil-rate band for purchases of residential properties from £125,000 to £250,000. This applies for purchases with an effective date on or after 23 September 2022.
Second, the government made two changes to first-time buyer's relief:
- increasing the level at which those eligible for first-time buyer's relief start paying SDLT from £300,000 to £425,000
- allowing first-time buyers to access the relief when they buy a property costing up to £625,000 rather than £500,000
Read more about these changes in HMRC's policy papers on:
Watch HMRC's videos about these changes:
HMRC's 2021 SDLT Manual updates and signs of increased investigations
HMRC released some notable updates to its SDLT guidance in 2021, including in relation to:
- the definition of 'garden or grounds'
- the section 75A anti-avoidance provisions
- the non-resident SDLT surcharge
Read the updates: HMRC Stamp Duty Land Tax Manual 2021
Some of these updates were issued in response to related court cases.
It also appears HMRC started to launch an increased number of investigations into incorrectly calculated SDLT once operations began to return to normal post pandemic.
HMRC has published further information about checks, repayments and paying back amounts not due.
We encourage you to ensure your clients take whatever steps they need to make sure their tax return is correct, including advising your clients to obtain advice from their expert tax advisers when necessary.
HMRC consultation on mixed-property purchases and multiple dwellings relief
We responded to an HMRC consultation that invited views on possible changes to two areas of the SDLT regime:
- changes to the way SDLT is calculated for purchases of mixed property (purchases that consist both of residential and non-residential property)
- options to reform multiple dwellings relief (available on the purchase of two or more dwellings)
The aim of the consultation is to make the SDLT system fairer and reduce the scope for misuse and incorrect claims.
The consultation closed on 22 February 2022.
Watch HMRC's webinar on the changes to multiple dwellings relief
HMRC and CIOT published a detailed blog on SDLT refunds that warns some claims being made by firms offering help with SDLT refunds are too good to be true. It urges property buyers to exercise independent judgement before making a claim. Read the blog: stamp duty refunds: too good to be true?
Practice notes
Disclosure of tax avoidance schemes
Government guidance
HMRC Stamp Duty Land Tax Manual