SDLT: what you need to know

Stamp Duty Land Tax (SDLT) is a type of property tax that buyers must pay when purchasing property or land over a certain value. To help you navigate the complexities of SDLT and what it means for you, here is our complete guide on everything you need to know about SDLT.

What is SDLT?

SDLT came into force in England and Northern Ireland in 2003. It is paid to the HMRC following the purchase of a freehold or leasehold property or piece of land. SDLT applies to properties purchased outright or with a mortgage.

Buyers must submit their SDLT return and payment within 14 days of the contract’s completion. Your solicitor or legal conveyancer can submit the return online on your behalf, or you can submit the SDLT return using the SDLT 1 paper return.

 SDLT for residential properties

You must pay SDLT on homes purchased for more than £250,000 unless you qualify for first-time buyer relief or another type of exemption. The amount of SDLT you pay depends on the purchase price of the property or land. It can also include the release or transfer of a debt.

If you’re purchasing a second home or an additional property as a buy-to-let, you’ll pay an additional 3% surcharge in addition to the standard rates.

If you haven’t lived in the UK for at least six months during the 12 months before the property purchase, you must pay a 2% surcharge in addition to the standard buyer rate. If you’re purchasing additional dwellings, such as a second home or buy-to-let, you must pay a further 3% SDLT surcharge.

SDLT exemptions for residential properties

If it’s your first property purchase, you qualify for first-time buyer relief and won’t have to pay SDLT on a property up to the value of £425,000.

Alternatively, if selling your main home takes longer than 36 months, you may qualify for a refund of the additional 3% SDLT. However, you must prove that exceptional circumstances prevented you from selling your home.

SDLT for commercial properties

You are required to pay SDLT on commercial, non-residential properties, such as:

• Commercial properties such as offices and shops
• Properties that are unsuitable for use as accommodation, such as garages
• Forests and agricultural land
• Property or land that’s not part of the grounds or garden of a residential property
• At least six residential properties purchased at the same time in one transaction

As with residential properties, SDLT rates for commercial properties are based on price bands. A percentage is payable on the portion of the property price which falls within each threshold. You are liable for residential SDLT rates on any agricultural land purchased as part of the grounds or garden of a residential property.

Even if you don’t have to pay SDLT, you must still submit an SDLT return on most transactions under £150,000.

For non-residential properties or those that have a mixed leasehold, you pay SDLT on the lease price based on these rates and the annual rent. These amounts are initially calculated separately before being added together.

The total rent across the life of the lease determines the net present value. You aren’t required to pay SDLT on the rent if the net present value is under £150,000.

You may have to pay a higher rate of SDLT if you make several transfers or purchases from the same person.

If the value of the purchase is less than the threshold, you don’t have to pay SDLT. There are also specific circumstances where you may be exempt from SDLT for a commercial property. For example:

• No type of payment (money or otherwise) has changed hands between parties
• The commercial property is left to you in a will
• The property is transferred to you following a divorce or dissolution of a civil partnership
• A registered landlord has granted a certain type of lease

SDLT FAQS

When is SDLT payable?

You have 14 days from completion to submit your SDLT return and pay any SDLT due to HMRC within 14 days to avoid facing penalties and interest. Your solicitor or conveyancer can file your return on your behalf online, or you can complete a paper return instead.

Do charities pay SDLT?

Most registered charities can claim SDLT relief on land or property purchases, subject to certain conditions. The charity must use the property or land to further the organisation’s charitable purpose or as a form of investment. Any profits earned from the interest are to be used by the charity for charitable purposes. If the charity fails to use the land or property for charitable purposes, it may lose the relief and become liable to pay SDLT.

Do I need to submit an SDLT return?

Most property and land transactions must be reported to HMRC, even if there’s no tax to pay. However, you don’t need to submit an SDLT return if no payment has changed hands, you were left the property in a will, or you have received the property or land following a divorce or dissolution of a civil partnership.

Can I claim back SDLT on buy-to-let?

You may be able to claim back SDLT on a buy-to-let property. For instance, if you’ve sold your main home and are now living in the buy-to-let property, you may be entitled to a refund on the surcharge you paid. You usually have up to three years to claim back SDLT on a buy-to-let.

How to claim an SDLT refund?

You can submit a claim for an SDLT refund online or by completing the form, printing it out and sending it to HMRC by post. You’ll be required to provide:

• Your details
• Information about the property you are claiming for, including the date of purchase and SDLT unique transaction reference you received following the transaction
• Details of the previous main home you sold and the name of the buyer
• Amount of tax you paid on the property that resulted in the higher rates of SDLT
• The amount of tax you’re claiming a refund for
• Your bank account details for the refund

How do I find my SDLT unique transaction reference number?

You can find your 11-character SDLT unique transaction reference number on your electronic SDLT5 certificate or paper return.

Is it possible to avoid SDLT on a second home?

In most cases, SDLT on a second home is unavoidable and something you just have to pay. However, you may be able to avoid having to pay it if one of the following applies to you:

• Ensuring that the person on the deed of the property has never purchased a home before, enabling them to use their first-time buyer status
• The second property costs under £40,000, or the share of the property you’re buying is less than £40,000
• Your second home is a motorhome, caravan, mobile home or houseboat, which are exempt from Stamp Duty

Remember, Stamp Duty avoidance schemes are often both unreliable and against HMRC rules and using one could make you liable for penalties or charges in addition to SDLT fees.

Do you pay SDLT when you sell a house?

You do not pay SDLT when you sell a house. It’s only the home buyer who pays SDLT, not the seller. It’s usually paid on the buyer’s behalf by their solicitor as part of the property purchase process.

Is SDLT tax deductible?

SDLT is not tax deductible, even on buy-to-let properties. However, you may be able to deduct it from your taxable gains to reduce the Capital Gains Tax you pay when you sell the property.

SDLT advice

SDLT is both a crucial and complex part of the property buying process. At Gerald Edelman, we provide comprehensive SDLT advice across a broad range of residential and commercial property arrangements, including:

• Residential and non-residential
• Mixed-use transactions
• Surcharge rates
• Application of SDLT reliefs such as charity and group relief
• Completion and submission of SDLT returns, including amendments
• Review completed transactions to identify potential repayment claims

If you’re planning a land or property purchase, working closely with our specialist SDLT team can ensure your compliance and avoid any potential pitfalls and risks associated with SDLT. Our accountants are experts in navigating the complexities of SDLT, identifying potential exemptions or relief, and helping clients avoid costly mistakes. We can also help you complete and submit your SDLT return to HMRC.

For more information about our SDLT support, please get in touch with our property tax advisers.