Stamp duty on leases
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.
You must pay Stamp Duty Land Tax if you buy land or property over a certain value in England, Wales and Northern Ireland. (In Scotland, SDLT has been replaced by a Land and Buildings Transaction Tax.)
The tax rate and payment threshold can vary according to whether the property is in residential or non-residential use, and whether the lease is a freehold or leasehold. Tax relief is available for certain kinds of property or transaction.
In 2019/20, the current SDLT threshold is £125,000 for residential properties and £150,000 for non-residential land and properties.
If the property is your first home, you bought it after 22 November 2017 and the purchase price was less than £500,000 then you are entitled to a relief (discount on the tax payable). You pay no tax on properties bought for less than £300,000. For properties bought for up to £500,000, you subtract £300,000 from the price, and pay 5% of the remainder as tax.
The reliefs are only available in England and Northern Ireland. There is currently no first time buyer relief in Wales.
In Scotland, your zero-tax threshold increases from £145,000 to £175,000.
If the transaction involves the purchase of a new lease with a substantial rent there may be an additional Stamp Duty Land Tax charge based on the rent.
If the value of the sale is above the payment threshold, SDLT is charged at the appropriate rate on the whole of the amount paid.
Residential properties with substantial rents
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. The exact amount depends on the length of the lease.
Non-residential property includes:
- commercial property such as shops or offices
- agricultural land
- 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.
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)
You must send an SLDT return and pay the tax within 14 days of completion of the transaction.
Your solicitor, agent or conveyancer might file a return and pay the tax on your behalf.
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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