Stamp Duty Land Tax: relief for land or property transactions
Details of the main reliefs available for Stamp Duty Land Tax (SDLT)
SDLT no longer applies in Scotland. Instead you pay Land and Buildings Transaction Tax when you buy property.
HM Revenue and Customs (HMRC) charge SDLT on property transactions in the UK where the value is more than certain thresholds. But some transactions qualify for reliefs that reduce the amount of tax you pay - or mean that you pay no SDLT.
To claim relief fill in an SDLT return, even if you don’t owe any tax. Enter the correct relief code from the drop down list at box ‘9’ of the return.
HMRC may charge you a penalty if you claim relief you’re not eligible for.
SDLT relief for multiple dwellings
You can claim relief when you buy multiple dwellings where a transaction or a number of linked transactions include freehold or leasehold interests in more than one dwelling.
If you claim relief, to work out the rate of tax HMRC charge:
- divide the total amount paid for the properties by the number of dwellings
- work out the tax due on this figure
- multiply this amount of tax by the number of dwellings
The minimum rate of tax under the relief is 1% of the amount paid for the dwellings.
You buy 5 houses for £1 million.
£1 million divided by 5 is £200,000.
The amount of SDLT you pay on £200,000 is £1,500 (0% of £125,000 + 2% of £75,000).
£1,500 multiplied by 5 is £7,500.
But that’s less than 1% of £1 million, which is £10,000. The amount of tax you pay is £10,000.
Higher rates of SDLT may be charged from 1 April 2016 on purchases of additional residential properties.
When multiple dwellings relief doesn’t apply
The relief doesn’t apply to the transfer of a freehold reversion or headlease where a dwelling has a long lease of 21 years or more.
The rate of tax HMRC charge for such a freehold reversion or headlease, or for any non-residential property included in the transaction, is the usual rate without any relief.
You may need to fill in a further return and recalculate the tax due if the number of dwellings is reduced within 3 years of the transaction. For example, if you combine 2 flats into 1.
You can claim this relief if the effective date of the transaction is after 18 July 2011. To claim, enter relief code ‘33’ in your return.
Building company buys an individual’s home
If a building company or property trader buys a home from someone who is buying a new home from them, the property bought by the house builder or property trader is exempt from SDLT if certain conditions are met. The person must:
- have lived in the property as their main or only home at some time during the 2 years before the building company or property trader bought it
- buy a new home from the house building company
- intend to live in the new property as their main or only home
Also, the area of land that the building company or property trader buys along with the old home mustn’t go above certain limits - normally 0.5 hectares.
To claim this relief, enter code ‘08’ in the SDLT return.
This relief doesn’t apply to individuals who swap houses.
Employer buys employee’s house
If an employer or property trader buys an individual’s house because they’re moving with their work, the purchase is exempt from SDLT if certain conditions are met.
You must meet all the conditions to qualify for this relief. The conditions are the:
- employee lived in the house as their main or only home at some time during the 2 years before their employer bought it
- employer or property trader is buying the house because the employee must move as a result of a job relocation
- price the employer or property trader pays isn’t more than the market value of the property
- area of land the employer or property trader buys is within certain limits - normally 0.5 hectares
To claim relief when an employer buys an employee’s house enter relief code ‘09’ in the SDLT return.
Sometimes a local authority agrees to make a Compulsory Purchase Order on a property so that a development by another party, for example a property developer, can go ahead. The owner of the property sells it to the local authority and the local authority sells it to the property developer.
As there are 2 sales, there’d normally be 2 amounts of SDLT to pay. But, if the property developer is doing the development, the local authority can get relief from SDLT when it buys the property.
A body that has the legal power to compulsorily buy land or property can claim this relief. They can still claim even if the sale isn’t made under those powers, as long as the sale allows development by a third party.
Enter relief code ‘10’ in the SDLT Return to claim relief for a transaction involving a compulsory purchase.
Property developer subject to planning obligations
As a condition of giving planning permission to a developer, a planning authority might ask the developer to provide amenities for the community - like a school. These are known as ‘planning obligations’.
Usually the developer transfers the building to the local authority to run once it’s finished. But there may be 2 successive charges of SDLT if the developer buys the land from its original owner and then transfers the finished building to the local authority.
The developer can claim the relief so that they don’t pay SDLT on the first sale.
To claim relief for complying with planning obligations, enter relief code ‘11’ in the SDLT Return.
Transfer of property between companies
Companies can claim relief within the same group that buy or sell property to or from each other. The buyer of the property can claim the relief if both:
- the buyer and seller are both companies
- at the effective date of the transaction both companies are members of the same group
Certain conditions and restrictions apply to SDLT group relief.
To claim it, enter relief code ‘12’ in the SDLT Return.
Relief for charities
As long as certain conditions are met, charities can get relief from SDLT when they buy land and property for charitable purposes.
A charity can claim some relief when they buy land and property jointly (as tenants in common) with a non-charity buyer. The charity claims relief on its share of the property.
HMRC can withdraw the relief if, within 3 years of the transaction, if the charity still owns the property, and either:
- stops being a charity
- uses the property for purposes that aren’t charitable
Enter relief code ‘20’ in the SDLT Return to claim SDLT charities relief.
Right to Buy properties
A Right to Buy transaction is the sale of a dwelling either:
- at a discount by a public sector body like a local housing authority
- when there’s a preserved right to buy
In both cases, this covers the grant of a lease of a dwelling.
The SDLT is worked out on the discounted price the buyer pays. It doesn’t include any additional payments which may become due.
For example, if the buyer sells before a certain period has elapsed.
To claim relief for right to buy transactions, enter relief code ‘22’ in the SDLT Return.
Registered social landlords
If a registered social landlord buys land and property they can claim relief from SDLT if either:
- most of the board members of the registered social landlord are tenants living in properties from the social landlord
- the seller of the property is a ‘qualifying body’, for example a local council
- a public subsidy funds the sale
Enter relief code ‘23’ in the return to claim registered social landlords relief.
There are other less common reliefs from SDLT you can claim in certain circumstances, for example First Time Buyers Relief and group, reconstruction or acquisition relief. These are explained in the SDLT manual.