Stamp Duty Land Tax — All you need to know

Key information
  • Stamp Duty Land Tax applies to property and land purchases in England or Northern Ireland
  • Thresholds have been temporarily raised for 2021
  • Different rates and thresholds apply to residential and non-residential properties

If you’re looking to buy land or property, chances are you’ll have to weigh up stamp duty in your list of property costs.

Stamp Duty Land Tax applies to all property and land purchases above a certain value in England and Northern Ireland. Whether you've got your eye on residential property or a commercial or mixed-use plot, you'll need to know when charges apply and what you'll be paying.

In this guide, we’ll take you through all the current rates and thresholds to make sure nothing takes you by surprise in your dream land or property search.

Stamp Duty thresholds

On the face of it, working out SDLT charges in 2021 looks a little complicated. A Stamp Duty Holiday was introduced in 2020 and the threshold for residential properties was increased from £125,000 to £500,000. But these were temporary rates that have been reduced again in stages:

  • From 1 July to 30 September 2021, the threshold drops to £250,000
  • From 1 October 2021, the threshold will return to £125,000

The threshold is where stamp duty begins to apply. That means you only pay tax on what's above the threshold, not on the total purchase price. For example, if you buy a plot of land or a property that costs £700,000, you won't pay anything on the first £500,000 but you will for the remaining £200,000.

How much you’ll pay

The SDLT rate increases in bands depending on your land or property's value. Once you're past the threshold, you'll pay 5% on amounts up to £925,000. The rate increases to 10% between £925,001 and £1.5 million, and then to 12% for anything exceeding £1.5 million.

For example, take a purchase price of £1 million. Under the previous rules, you would have paid no stamp duty on the first £500,000, 5% on the next £425,000, and then 10% on the remaining £75,000.

Those bands remain the same now (post July 2021) even though the threshold drops from £500,000 to £250,000 for the zero stamp duty allowance. After 1 October 2021, an additional 2% band will be introduced between £125,001 and £250,000 before the 5% rate which continues to apply between £250,001 and £925,000.

If you're buying an additional property to your main residence, then you'll also pay a 3% surcharge on top of each band. Bear in mind that also includes 3% tax on the nil-rate band up to £500,000 as well, not just the amount beyond the threshold. There is also a 2% surcharge for non-UK residents buying property.

Stamp Duty Land Tax has to be paid by filing an SDLT return to HMRC within 14 days of completion. This will usually be handled by your solicitor during conveyancing and be added to their fees, but you can file the return and pay the duty yourself.

To get an accurate idea of what you'll have to pay, use HMRC's Stamp Duty calculator to work out the rates for your next property purchase.

Non-residential or mixed use property

You’ll face different stamp duty rates and thresholds if you’re buying mixed use or non-residential land. This includes property with shops and offices, dwellings like flats connected to commercial properties, or woodland.

Agricultural land can fall into either category. If it's part of a working farm, it counts as non-residential. But any agricultural land that comes as the grounds of a dwelling, like a field or smallholding adjoining a house, will be classed as residential property.

Equestrian property is distinct from agricultural property, so a piece of land for keeping horses will be taxed at the residential stamp duty rate.

For mixed and non-residential property the stamp duty threshold is £150,000. The next £100,000 beyond the threshold will be subject to a 2% rate, and any amount exceeding £250,000 will be taxed at 5%. This will remain the same throughout 2021, as non-residential rates haven't received a temporary increase like residential rates.

Stamp duty can take a bit of puzzling out, but it doesn’t have to be a barrier to buying your dream land or property.

Addland makes it easy to find, research, buy and sell land. Start your land journey today.

Published: 06 July 2021
Last updated: 06 October 2021

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