Stamp duties are levied on conveyances and transfers of land and property, and on securities (share and bond) transactions. The term comes from the fact that historically stamps on documents, following their presentation to the Stamp Office, indicated payment. Land and property transactions are now charged Stamp Duty Land Tax (SDLT), whereas electronic transfers in securities are charged Stamp Duty Reserve Tax (SDRT). In 2018/19 stamp duties raised £15.6 billion in total; SDLT accounted for just over three quarters of this total (£11.9 billion).[1]
Generally SDLT is charged on increasing portions of the property price above a nil rate band, set at £125,000 when someone buys a residential property (such as a house or flat).
Property or lease premium or transfer value SDLT rate
- Up to £125,000 : Zero
- The next £125,000 (the portion from £125,001 to £250,000) : 2%
- The next £675,000 (the portion from £250,001 to £925,000) : 5%
- The next £575,000 (the portion from £925,001 to £1.5 million) : 10%
- The remaining amount (the portion above £1.5 million) : 12%
Example
- If you buy a house for £275,000, the SDLT you owe is calculated as follows:
- 0% on the first £125,000 = £0
- 2% on the next £125,000 = £2,500
- 5% on the final £25,000 = £1,250
- Total SDLT = £3,750
First time buyers are entitled to a relief on purchases up to £500,000.
An additional rate of SDLT is charged if someone purchases a new residential property, and, as a result, owns more than one. This adds an additional 3% to the rate of tax charged.[2]
Guidance on SDLT is collated on Gov.uk. This includes an online calculator for buyers and sellers to determine how much duty would be payable on a specific transaction.
SDLT has been devolved to both Scotland (from April 2015) and Wales (from April 2018). Both the Scottish and Welsh Governments charge their own replacement taxes: the Land and Buildings Transactions Tax collected by Revenue Scotland; and the Land Transaction Tax collected by the Welsh Revenue Authority.
On 8 July 2020 the Chancellor gave a statement to the House on the state of the economy in the context of the Covid-19 pandemic, setting out a series of measures to boost job creation. As part of this Mr Sunak announced a temporary increase to the nil rate band for residential house sales, from £125,000 to £500,000.[3] The new nil rate band would apply for 8 July 2020 to 31 March 2021, at an estimated Exchequer cost of £3.8bn.[4] At this time HMRC published detailed guidance on the application of the new £500,000 nil rate band[5] as well as a a short impact assessment.
A non-first time buyer paying the average English house price (as at January 2020) would save £2,500 as a result of the increased threshold. Looking regionally – as the Resolution Foundation did at the time – the average savings, based on the average price paid in each region, varies significantly. If a non-first time buyer paid the average price in London they would save £14,200. A buyer paying the average price in the North East would make almost no saving: the average house price in the North East is £127,000 which is only a little over the previous threshold.
It was highly likely that a significant part of this tax cut would be on house sales in London and the South East. The majority of SDLT receipts come from these two regions. HMRC estimate that in 2018/19, 39% of SDLT receipts came from residential sales in London and 22% came from residential sales in the South East. However, there are wider benefits to consider. The Treasury expected the policy to stimulate the housing market, bringing wider benefits to the industry. In their response to the Chancellor's announcement, the Institute for Fiscal Studies noted that an earlier SDLT holiday delivered an effective stimulus in 2008/09
Following the Chancellor’s statement, the House approved a Provisional Collection of Taxes Motion, which gives immediate effect to this measure (HC Deb 8 July 2020 cc1016-7). In a letter to the Chair of the Treasury Select Committee the Chancellor confirmed, “the increase in the nil rate band will be enacted by the Provisional Collection of Taxes Act 1968 providing the interim authority for the change before resolutions are debated in Parliament at a later date” (Letter dated 08/07/2020 from Rishi Sunak MP to Mel Stride MP regarding the changes to Stamp Duty Land Tax, Deposited Paper (DEP2020-0407), 8 July 2020).
On 9 July 2020 the Leader of the House announced that all of the stages of the Stamp Duty Land Tax (Temporary Relief) Bill in the Commons would be taken on 13 July. In turn the Bill, which only comprises of two clauses, was introduced, and agreed, without amendment, on that day (HC Deb 13 July 2020 cc1290-1342; House of Commons, Votes and Proceedings No.85, 13 July 2020). In turn the Stamp Duty Land Tax (Temporary Relief) Act 2020 received Royal Assent on 22 July 2020 (Votes & Proceedings, No.91, 22 July 2020).
Subsequently in the 2021 Budget on 3 March 2021 the Chancellor announced an extension of the SDLT holiday:
- extending to 30 June 2021 the nil rate band of £500,000, which was due to end on 31 March 2021
- introducing a nil rate band of £250,000 for the period 1 July 2021 to 30 September 2021.
Provision to this effect was included in the Finance Act 2021 (specifically section 87 of the Act) amending the Stamp Duty Land Tax (Temporary Relief) Act 2020 accordingly.
A Commons Briefing paper provides further details of the SDLT holiday, and earlier reforms to the taxation of residential property: Stamp duty land tax on residential property, CBP7050, 10 August 2021.
Two other Commons Briefing Papers look at the wider issues of housing need and housing supply: Tackling the under-supply of housing in England, CBP7671, 14 January 2021 & Stimulating housing supply: Government initiatives (England), CBP6416, 11 February 2021.
Data on house prices, mortgage approvals and house-building is provided in, Housing Market: Key Economic Indicators, CBP2820, 31 August 2021.
The background to the Chancellor’s 2020 statement is explored in, The Chancellor’s summer economic update: Background briefing, CBP8957, 7 July 2020
Notes :
[1] HM Revenue & Customs, UK Stamp Tax statistics 2018 to 2019, October 2019. HMRC collate statistics on stamp taxes on Gov.uk.
[2] HMRC, Stamp Duty Land Tax, retrieved September 2021
[4] HM Treasury, Plan for Jobs, CP261, July 2020 para 2.39; p7 (Table 1).
[5] HMRC, Stamp Duty Land Tax: temporary reduced rates, updated 8 June 2021. See also, HMRC, SDLT Manual, para SDLTM00055, retrieved September 2021