Stamp Duty Land Tax: The Definitive Guide

Figuring out Stamp Duty Land Tax (SDLT) and whether you need to pay it can be challenging and confusing – especially if you aren’t entirely sure of how it works and what it is. 

If you’re a second homeowner with a property that has been deemed uninhabitable, did you know that you could claim relief on SDLT? 

In addition, first-time home buyers and homeowners with multiple dwellings are also eligible for SDLT relief. 

There’s no better time than now to start learning about stamp duty land tax, especially if you’re about to purchase your first home, or thinking about purchasing another one. 

Fortunately, our Stamp Duty Claims team of experts are here to help, offering specialist advice, particularly when it comes to claiming refunds on SDLT. 

We have comprised this comprehensive guide to help you with everything you need to know about stamp duty land tax including:

• What is stamp duty land tax?
• The rate of SDLT
• How payment of SDLT works
• The (brief and recent) history of SDLT
• How to avoid paying SDLT
• Stamp Duty Claims’ role in helping you claim a stamp duty refund

Stamp Duty Claims has a proven track record of successful claims, so you can rest assured that you’re in safe hands when you start a SDLT refund claim with us. 

So, if you believe that you are owed a stamp duty rebate, get in touch with our team today. 

What is stamp duty land tax?

Stamp duty land tax refers to tax that must be paid to HM Revenue and Customs (HMRC) if you buy a residential property or land that is above a certain price threshold. This is applicable for properties or land in England and Northern Ireland, whilst different tax legislation is applied for properties or land in Scotland and Wales. 

An SDLT return must be sent to HMRC and SDLT paid within 14 days of completion of sale. Failure to send any amended returns within the deadlines could result in a £100-£200 penalty. You may also be charged interest for late payments, so it is important to pay and send the SDLT return on time. 

In 2019, the PN Bewley v HMRC case ruled that residential properties that aren’t suitable as dwellings can be classed as non-residential, meaning that the owner is eligible to only pay non-residential SDLT rates instead of the standard residential rate (including the additional 3% rate).

This meant that homeowners with unlivable dwellings could claim SDLT refunds against HMRC – and this is where Stamp Duty Claims come in. If you have purchased a property within the last 4 years that you feel meets the criteria as an uninhabitable property (don’t worry – we’ll explain this in detail further on), contact our advisors now to see whether your claim is feasible. 

Is stamp duty the same as land tax?

SDLT is not the same as Land Transaction Tax (LTT) or Land and Buildings Transaction Tax (LBTT), which are applied in Wales and Scotland respectively. Although they are of similar concepts, they have varying rules and regulations that make them distinct from each other. 

If you are buying a property or land in England and Northern Ireland, SDLT will apply to you, whereas, if you buy property or land in Wales or Scotland, LTT or LBTT will be applicable. 

The LTT threshold for properties or land in Wales is currently:

• £225,000 for residential properties (no other property owned)
• £225,000 for non-residential land and property 

Meanwhile, the LBTT threshold in Scotland currently stands at:

• £145,000
• £175,000 for first-time buyers 
• £150,000 for non-residential and lease premiums

However, you don’t need to worry about this if you are attempting to buy property or land in England or Northern Ireland. SDLT will still apply. 

Who pays stamp duty land tax?

You are obligated to pay SDLT tax when you buy:

• A freehold property
• A leasehold (new or existing)
• A property via a shared ownership scheme

You must also pay the tax if you are transferred land or property. 

As of December 2022, SDLT only begins to apply if you buy properties and land valued at:

• £250,000
• £425,000 for first-time buyers (residential properties worth £625,000 or less)
• £150,000 for a non-residential property

It’s worth noting that these thresholds sometimes change, as they have changed since September 2022, so it’s a good idea to check these before you plan on buying a new or additional property or land. 

What is the current rate of stamp duty land tax?

The type of buyer you are, your circumstances, and the purchase price of your property or land can influence what SDLT tax band your property or land falls under, therefore determining the amount of SDLT you pay. 

Residential property stamp duty rates

As it stands, the current residential rates of SDLT for a single property are:

For example, if the property purchase price of your new home in November 2022 is £300,000, this is how you can calculate how much SDLT you owe:

1. 0% up to £250,000 of £300,000 = £0
2. £300,000 – £250,000 = £50,000 
3. 5% on remaining £50,000 = £2,500
4. Total SDLT to pay = £2,500

On the other hand, if you purchase a property for £1.2 million, the calculation is as follows:

1. 0% up to £250,000 of £1.2 million = £0
2. £925,000 – £250,000 = £675,000
3. 5% of remaining £675,000 = £33,750
4. £1,200,000 – £925,000 = £275,000
5. 10% of remaining £275,000 = £27,500
6. £33,750 + £27,500 = £61,250
7. Total SDLT = £61,250 

If you are purchasing a leasehold property, the standard SDLT rate applies as shown above, but if the net present value (NPV; total rent across the life of the lease) exceeds the £250,000 threshold, SDLT is set at 1% on the remaining amount. 

Higher stamp duty land tax rates

If you are a second-time buyer, you are liable to the standard rate of SDLT plus an extra 3% on top of this. Thus, it’s important to consider how much SDLT tax you could be paying if you buy a second property. 

To qualify for the higher rates, the following must apply:

• You own more than 1 residential property worth £40,000 or more
• Your main home has not been sold or given away
• Others do not have a lease on the property that has more than 21 years left 

What does the higher rate mean for your SDLT rates?

Using the previous £300,000 property example, this means that your SDLT will increase:

1. 3% up to £250,000 = £7,500
2. £300,000 – £250,000 = £50,000 
3. 8% on remaining £50,000 = £4,000
4. £7,500 + £4,000 = £11,500
5. Total SDLT for second property = £11,500

The higher rate of 3% does not apply if your new purchase is replacing your main residence that has already been sold. The additional 3% rate is also applied when you are purchasing properties as buy-to-lets. 

What if this is my first home?

If you are buying your first home, the normal SDLT rate does not necessarily apply to you if the property is worth no more than £625,000. Instead, you can claim first-time buyer SDLT relief, which changes the rates as follows:

This is explained in the next example – you’re a first-time buyer purchasing a residential property valued at £525,000:

1. 0% up to £425,000 of £525,000 = £0
2. £525,000 – £425,000 = £100,000
3. 5% on remaining £100,000 = £5,000
4. Total SDLT = £5,000

What if I’m not a UK resident?

For SDLT purposes, you aren’t considered a UK resident if you haven’t lived in the UK for at least 6 months of the 12 months before your purchase. If this is the case, then you will have to pay a 2% surcharge when buying property or land in England and Northern Ireland. 

SDLT can be confusing, so if you’re struggling to work out how much SDLT you might owe, you can use an online SDLT calculator to help you calculate how much SDLT you will pay for your first property or land purchase. 

Non-residential rates

The SDLT rates for non-residential and mixed land and property differ slightly to residential rates. In particular, non-residential properties are classified as:

• Commercial property like retail shops
• Uninhabitable property 
• Forests
• Agricultural land used for agricultural reasons such as a working farm
• Any other land or property that is not considered a part of a dwelling’s grounds
• ≥6 residential properties that are bought in one transaction 

A mixed property consists of a property with both residential and non-residential elements – for example, a shop that is connected to flats above. 

So, what are the non-residential SDLT rates for properties and land in England and Northern Ireland?

For instance, you purchase a freehold commercial property for £325,000. How much SDLT will you owe?

1. 0% up to £150,000 of £325,000 = £0
2. £250,000 – £150,000 = £100,000
3. 2% of remaining £100,000 = £2,000
4. £325,000 – £250,000 = £75,000
5. 5% of remaining £75,000 = £3,750
6. £2,000 + £3,750 = £5,750
7. Total SDLT = £5,750 

In terms of leasehold non-residential properties, if the net present value (NPV) exceeds £150,000 to £5 million, you will have to pay SDLT at a 1% rate, whereas properties worth over £5 million will increase the SDLT rate to 2%. 

Is stamp duty land tax a one-off payment?

The conveyancer or solicitor usually pays SDLT as a one-off payment to HMRC on your behalf within 14 days of the exchange of contracts, otherwise known as completion of purchase. This is typically included in their service fee, so keep an eye out when you receive the invoice or receipt from your conveyancer. 

Otherwise, you can fill out the SDLT returns yourself and pay via the HMRC website. 

SDLT is only able to be paid in one lump sum – HMRC does not accept instalment payments nor credit cards, so if you’re planning to buy a property valued over £250,000, it would be a good idea to save some money aside to pay for the SDLT. 

How has stamp duty land tax changed over the years?

Stamp duty tax was first introduced in 1694, but stamp duty land tax as we know it now was implemented in 2003 to replace the old system. Since then, the SDLT system has gone through many changes. 

The current SDLT system is self-assessment based, meaning that it is at the responsibility of the new homeowner and their conveyancer or solicitor to submit accurate SDLT returns and payment to HMRC. 

Most recently, the UK Government amended the SDLT rates on 23 September 2022, meaning that the previous tax bands between 1 October 2021 to 22 September 2022 no longer apply to properties or land that is bought after 22 September 2022. 

Particularly, this change saw the previous nil-rate threshold increase from £125,000 to £250,000, and the first-time buyer relief increase to £425,000 from £300,000. 

These changes led to a boost in the number of SDLT-exempt homes on sale in the housing market in England – 33% of houses became exempt after the change, compared to 7% when the threshold was lower. For first-time buyers, this also meant that 66% of homes in England were exempt from SDLT for them. 

The September 2022 thresholds are enabling first-time buyers and property buyers to enter the market during our current economic turmoil, allowing them to buy properties with only having to pay little – or none at all in some circumstances – stamp duty tax. 

Is there any way I can avoid paying stamp duty?

Although SDLT is an item of legislation in England and Northern Ireland, as previously mentioned, there are some ways in which you may be exempt or can claim relief on SDLT. On the one hand, avoiding paying SDLT when you are due to pay without valid exemptions can lead to penalties and fines. 

What are stamp duty land tax exemptions?

There are some exempt property and land transactions where you do not need to send an SDLT return or pay SDLT to HMRC. These are:

• Transactions where payment does not change hands 
• Property that has been left in a will
• Transferred property as a result of divorce or civil partnership dissolution
• A freehold property purchased for less than £40,000
• Purchase of a new or assigned lease of 7 years or more – annual rent is less than £1000 and premium is no more than £40,000
• Purchase of a new or assigned lease that is less than 7 years – price must not exceed residential and non-residential SDLT thresholds 
• Use of alternative property financial arrangements 

What are stamp duty land tax reliefs?

You may also be eligible for tax relief, which can decrease the amount of SDLT you pay to HMRC. It can get a little complicated, which is why we recommend reading the UK Government’s guidance on reliefs when it comes to SDLT. 

Although these may reduce the total SDLT you pay, or even end up with no tax to pay at all, you will still have to file SDLT returns to HMRC. You can claim SDLT reliefs for:

• First-time buyers including First-Time Buyers’ Relief for buyers purchasing their first home where you can claim relief of up to £425,000 of property price
• Multiple dwellings
• Right-to-buy properties
• Crown employees
• Charitable purposes
• Employers purchasing their employees’ house
• Transfer of property between companies 
• Building companies buying someone’s home
• Compulsory housing purchases by local authorities 
• Property investment funds
• Property developers providing planning obligations such as amenities for the community 
• Properties purchased by registered social landlords

How can Stamp Duty Claims help me?

At Stamp Duty Claims, we specialise in stamp duty rebate, particularly when it comes to homeowners who have been charged excess in SDLT when they should not have been. Specifically, we work with homeowners with an additional dwelling that is deemed uninhabitable but have been charged the higher rate of SDLT on this property.

Properties that are deemed unfit or unsuitable for persons to live in are regarded as non-residential, thus subject to non-residential SDLT rates. As a result, if you have bought an additional property but paid the higher 3% SDLT rate despite the property being unsuitable for living purposes, then you are indeed entitled to an SDLT rebate.

What counts as an uninhabitable second property?

If you experience any of the following on your additional properties, you may be able to make a claim against HMRC for accidental stamp duty surcharge:

• Damp and mould 
• Insects or pests 
• Asbestos
• Defective structures
• Missing parts of dwelling – floor boards, carpets, heating, electrics…
• Absence of power or water supply 

The above list is not exhaustive, so if you have reason to believe that you own a second home that is unfit to live in, yet you still paid the higher residential rate of SDLT at purchase of property, then you may be entitled to an SDLT refund.

If we determine that your claim is viable, we will be in touch to gather evidence to support your claim against HMRC. 

If you believe that you are eligible for a refund claim on stamp duty land tax, contact us for more information. 

Claim relief of stamp duty land tax for uninhabitable second properties with Stamp Duty Claims

Stamp Duty Claims operate on a ‘no win, no fee’ basis, so you can rest assured that your money for our services will only be taken once your claim has been successful. Our experienced team of consultants specialise in obtaining SDLT relief for uninhabitable second properties, so our focus is entirely on reclaiming your money that was wrongfully claimed by HMRC. 

With ongoing turbulence in the UK’s economic climate, claiming back money that was overpaid is certainly important, possibly saving you hundreds to thousands of pounds. 

You can trust Stamp Duty Claims to represent you in claiming a refund on SDLT for your uninhabitable dwelling. Book a 15-minute assessment call with one of our experts today to get you started on your SDLT rebate – at no extra cost.