Stamp Duty Land Tax (SDLT) Definition

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Stamp Duty Land Tax (SDLT) Definition

What Is the Stamp Duty Land Tax (SDLT)?

The phrase stamp duty land tax (SDLT) refers to a tax levied by the United Kingdom government on the acquisition of land and properties worth more than a specified amount. This tax must be paid to Her Majesty’s Revenue and Customs (HMRC) within 14 days of the completion of a property acquisition or transfer in England and Northern Ireland. The rates charged are essentially determined by whether the land or property is used for residential, non-residential, or mixed uses.

Key Takeaways

  • The UK government imposes a stamp duty land tax on the acquisition of land and buildings worth more than a specific amount.
  • The tax levied on property owners is determined on the kind of property and the date of purchase.
  • Residential property taxation changes during the year, however non-residential and mixed-use property taxation remains constant at £150,000.
  • Unless an exception applies, HMRC needs an SDLT report even if the land or property value is less than the threshold.

Understanding the Stamp Duty Land Tax (SDLT)

People in England and Northern Ireland are liable to the stamp duty land tax anytime they buy or transfer property in kind for payment, including:

  • Residential property: meant for use as the purchaser’s primary dwelling.
  • Non-residential land and property includes commercial property such as stores or offices, as well as farmland.
  • A mixed-use property is one that has both residential and business areas.

The amount of tax is decided by a variety of criteria, including the date and price of acquisition, as well as the kind of property. The SLDT criteria are broken down by date and property type:

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Stamp Duty Land Tax Thresholds
Date of PurchaseResidential PropertyNon-Residential and Mixed-UseProperty
July 8, 2020-June 30, 2021£500,000£150,000
July 1, 2021-Sept. 30, 2021£250,000£150,000
Oct. 1, 2021£125,000£150,000

The SDLT due grows on a sliding scale for prices exceeding certain thresholds, with the maximum rate for residential homes being 12% of the cost that reaches £1.5 million. The maximum rate for non-residential land and property, on the other hand, is 5% payable on any sum above £250,000.

Payment is payable within 30 days of completing the purchase of a freehold property or acquiring a new or pre-existing leasehold. The tax is also due when a property is purchased under a shared ownership program run by an authorised public authority, such as housing associations or development organizations.

Land and Buildings Transaction Tax is levied on Scottish homeowners, whereas Land Transaction Tax is levied on Welsh homeowners.

Special Considerations

Even if the value of the land or property acquired is less than the stamp duty land tax threshold, the HMRC requires an SDLT report to be filed unless an exemption applies. Exemptions from filing the stamp duty land tax return are common when no money is exchanged on the transfer of a property or the freehold property acquisition is less than £40,000.

If the buyer purchases more than one residential property, an extra rate of 3% is applied on top of the basic SDLT amount. Special charges apply to corporate companies purchasing properties, individuals purchasing six or more properties in one transaction, or numerous acquisitions or transfers done by the same buyer and seller.

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In some cases, tax relief is available, which may lower the amount of SDLT due. For example, first-time homebuyers are eligible for a discount. HMRC’s website has comprehensive information on the stamp duty land tax rates, laws, and requirements.

History of the Stamp Duty Land Tax (SDLT)

Stamp duty was first imposed in the United Kingdom in the 1600s. This tax was levied on a wide range of commodities, including clothes, medications, books, and even checks. The funds raised were utilized to finance governmental objectives such as war.

The system evolved throughout time, and the stamp fee was repealed for most products and services but not for real estate. The current SDLT system was created in the late 1950s. At the time, the average price of a property was £20,000, and the tax was quite low—buyers were not taxed on purchases under £30,000, and beyond that, they were charged 1%.

Between 2019 and 2020, revenue from the stamp duty land tax was around £11.6 billion.

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