Read the original guidance here:
HMRC SDLT: SDLTM30000 – Application

Changes to Stamp Duty Land Tax in Scotland and Wales

From April 1, 2015, the rules for Stamp Duty Land Tax (SDLT) will change in Scotland. Instead of paying SDLT for land transactions, buyers will now pay a new tax called Land and Buildings Transaction Tax (LBTT). This tax is managed by the Scottish Government. For more information on LBTT, visit the Scottish Government’s official website.

From April 1, 2018, anyone completing land transactions in Wales will need to pay Land Transaction Tax (LTT). The Welsh Revenue Authority will oversee this tax. Consequently, you will no longer pay SDLT or submit a return to HM Revenue and Customs (HMRC) for these transactions. For more information about the change from SDLT to LTT, please refer to the guidance on cross-border and transitional matters.

Key Concepts of SDLT

SDLT is a tax charged on land transactions in England and Northern Ireland. Below are some key points regarding SDLT:

• Chargeable Consideration: This refers to the total amount paid for the property, including any additional payments such as goods or services.
• Tax Rates: Different rates apply based on the value of the property. For example, if the chargeable consideration exceeds £1 million for residential property, a tax rate of 5% is applied.
• Linked Transactions: These occur when two or more transactions are connected, often affecting the total SDLT liability.
• Joint Purchasers: If more than one person buys a property together, special rules apply to how SDLT is calculated.

Understanding SDLT Rates

The SDLT rates increase with the value of the property. Below are the rates:

• Less than £125,000: 0% tax rate
• £125,001 to £250,000: 2% tax rate
• £250,001 to £925,000: 5% tax rate
• £925,001 to £1.5 million: 10% tax rate
• Above £1.5 million: 12% tax rate

For example, if you purchase a home for £1.2 million, the SDLT would be calculated as follows:

• 0% on the first £125,000 = £0
• 2% on the next £125,000 = £2,500
• 5% on the next £675,000 = £33,750
• 10% on the remaining £275,000 = £27,500

This leads to a total SDLT of £63,750.

Linked Transactions Explained

Linked transactions occur when two or more transactions are connected. This means they should be treated as a single transaction for calculating tax. Here are examples of linked transactions:

• Example 1: If you buy two properties from the same seller in one arrangement, these would be considered linked transactions.
• Example 2: A property purchase and a gift of furniture in the same agreement can also be a linked transaction.

When dealing with linked transactions, you must take the total consideration into account to determine the total SDLT owed.

Joint Purchasers’ Rules

When buying a property with someone else, specific rules govern the SDLT calculation for joint purchasers:

• Each purchaser is liable for their share of the transaction.
• The total consideration is divided among purchasers to determine how much SDLT each needs to pay.
• For example, if two friends purchase a property for £300,000, they may decide to split the payment equally. Each would then be responsible for tax on £150,000.

Special Cases of SDLT

There are also special cases where different rules apply concerning SDLT:

• Registered Social Landlords: Specific rules apply regarding properties owned and managed by registered social landlords.
• Pension Funds: Certain transactions involving pension funds may follow distinct taxation rules.
• Trusts: Transactions within trusts have special provisions as they may involve changes in ownership beyond immediate financial exchange.

Deemed Market Value Cases

In some scenarios, HMRC determines the deemed market value to assess SDLT. Here are examples:

• Example 1: If a property is sold below its market value, HMRC might assess SDLT based on the market price rather than the selling price.
• Example 2: If a property is transferred to a family member for £50,000, but the market value is £100,000, SDLT will be calculated on the £100,000 value.

Additional Considerations Under SDLT

Different scenarios may affect how SDLT is assessed:

• Power of Attorney: When someone acts on behalf of another, SDLT implications may change according to the transaction’s nature.
• Settlement Changes: Changes in trustees within a continuing settlement can affect SDLT calculations.
• Special Provisions for Partnerships: Partnerships have unique SDLT treatment to consider when transactions occur.

Individuals involved in managing partnerships or trusts should be aware of special provisions applicable to their situations. For more information, see SDLTM33100 to SDLTM34800 for detailed guidance on partnerships and their SDLT implications.

Income Considerations and SDLT

Income generated from properties also warrants attention. In some cases, income may influence the SDLT calculation:

• If you derive income from rental agreements associated with properties, it might impact your overall investment strategy.
• Income from the property may also play a role when determining the financial threshold for SDLT rates.

All involved in purchasing properties should consult guidance whether they are first-time buyers, investors, or acting on behalf of others to ensure complete understanding of SDLT responsibilities.