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Stamp duty on leases

The Stamp Duty Land Tax (SDLT) is charged on land and property transactions in the UK. The tax is charged at different rates and has different thresholds for different types of property and different values of transaction. This article can help you calculate the total SDLT payable on your transaction. 

 

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Contents

Introduction

 

 

Introduction

The tax rate and payment threshold can vary according to whether the property is in residential or non-residential use, and whether it is a freehold or leasehold. SDLT relief is available for certain kinds of property or transaction.

If the transaction involves the purchase of a new lease with a substantial rent there may be an additional Stamp Duty Land Tax (SDLT) charge to that shown below, based on the rent.

Purchase price/lease premium or transfer value

SDLT rate

SDLT rate for first-time buyers

Up to £125,000

Zero

Zero

Over £125,000 to £250,000

1%

Zero

Over £250,000 to £500,000

3%

3%

Over £500,000

4%

4%

Over £1 million

5%

5%


If the value is above the payment threshold, SDLT is charged at the appropriate rate on the whole of the amount paid.

The first time buyer's £250,000 threshold applies from 25 March 2010 up to 24 March 2012 inclusive.

£1 million threshold for wholly residential property

From 6 April 2011 SDLT on residential properties over £1 million is charged at 5%. It does not apply to non-residential or mixed-use properties.

There are some transitional arrangements for contracts which were entered into before 25 March 2010 but not completed by 6 April 2011 in most of these cases the new rate will not apply.

If the property is in an area designated by the government to be 'disadvantaged' then a higher threshold of £150,000 applies for residential properties

SDLT for properties in disadvantaged areas

Purchase price/lease premium or transfer value

SDLT rate

SDLT rate for first-time buyers

Up to £150,000

Zero

Zero

Over £150,000 to £250,000

1%

Zero

Over £250,000 to £500,000

3%

3%

Over £500,000 to £1 million

4%

4%

Over £1 million

5%

5%

From 25 March 2010 up to 24 March 2012, first-time buyers can claim a relief from SDLT if the amount paid for the property is under £250,000. This relief applies whether or not the property is in an area designated as disadvantaged

When a new residential lease has a substantial annual rent, SDLT is payable on both of the following, which are calculated separately and then added together:

  • the lease premium (purchase price)
  • the 'net present value' (NPV) of the rent payable

The NPV is based on the value of the total rent over the life of the lease and can be worked out using the HMRC online calculator.

In practice, SDLT only becomes payable on a fairly high rent - starting at around £4,500 a year for a 99-year lease, for example. However the exact amount depends on the length of the lease.

SDLT on rent for new residential leasehold properties

Net present value of rent - residential

SDLT rate (includes first-time buyers)

£0 - £125,000

Zero

Over £125,000

1% of the value that exceeds £125,000

If six or more properties form part of a single transaction the rules, rates and thresholds for non-residential properties apply. The amounts paid for all the properties in the transaction must be added together in order to establish the rate of tax payable.

Non-residential property includes:

  • commercial property such as shops or offices
  • agricultural land
  • forests
  • any other land or property which is not used as a dwelling
  • six or more residential properties bought in a single transaction

A mixed use property is one that incorporates both residential and non-residential elements.

The table below applies for freehold and leasehold non-residential and mixed use purchases and transfers.

If the transaction involves the purchase of a new lease with a substantial annual rent, there may be additional Stamp Duty Land Tax (SDLT) charge to that shown below, based on the rent.

Non-residential land or property rates and thresholds

Purchase price/lease premium or transfer value (non-residential or mixed use)

Purchase price/lease premium or transfer value (non-residential or mixed use)

Up to £150,000 - annual rent is under £1,000

Zero

Up to £150,000 - annual rent is £1,000 or more

1%

Over £150,000 to £250,000

1%

Over £250,000 to £500,000

3%

Over £500,000

4%

Note that for the above purpose the annual rent is the highest annual rent known to be payable in any year of the lease, not the net present value used to determine any tax payable on the rent

When a new non-residential or mixed use lease has a substantial annual rent, SDLT is payable on both of the following which are calculated separately and then added together:

  • the lease premium or purchase price
  • the net present value of the rent payable (this is based on the value of the total rent over the life of the lease and can be worked out using the HM Revenue & Customs (HMRC) online calculators)

SDLT on rent for new leasehold properties (non-residential or mixed use)

Net present value of rent - non-residential

SDLT rate (includes first-time buyers)

£0 - £150,000

Zero

Over £150,000

1% of the value that exceeds £150,000

Paying Stamp Duty by post

When paying by post please:

  • make your cheque payable to 'HM Revenue & Customs only'
  • do not fold the cheque and do not fasten it with paper clips or staples or in any other manner

Where to send your documents and payment

If paying by post, please send to:

Birmingham Stamp Office
9th Floor
City Centre House
30 Union Street
Birmingham
B2 4AR

If using the DX service please send to:

Birmingham Stamp Office - Stamp Duty
DX15001
Birmingham 1

To allow for possible postal delays (for which HMRC is not responsible) please allow at least three working days for your payment to reach them.

 

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Please note that the information provided on this page:

  • Does not provide a complete or authoritative statement of the law;
  • Does not constitute legal advice by Net Lawman;
  • Does not create a contractual relationship;
  • Does not form part of any other advice, whether paid or free.
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