Is SDLT payable on a separate plot of land with planning permission but no dwelling built?

Introduction

People often ask whether Stamp Duty Land Tax (SDLT) applies when they are buying a plot of land rather than a house. The answer is usually yes, because SDLT can apply to land as well as buildings. The more important question is whether the land is treated as residential or non-residential for SDLT purposes, because that affects the rate.

A common area of dispute is where land was once part of a garden, has planning permission for a new house, and some early groundwork has started. In that situation, buyers and conveyancers may disagree about whether the plot counts as residential property, land in the process of being constructed as a dwelling, or simply non-residential land.

The Question

A buyer proposed to purchase a separate plot of land for £160,000 from a developer. The land had originally formed part of the garden of a nearby house, but before the related house purchase took place it had already been split off and registered as a separate title. The plot had planning permission for a new dwelling, and footings had been dug, but no building had been constructed above ground.

The buyers did not intend to build on the land. They wanted to buy it to preserve privacy and avoid future access issues. Their conveyancer said SDLT was payable at 5% on the full price. The buyers believed that was wrong and argued that, at most, the non-residential rates should apply.

Nick’s Explanation

Nick’s view was that SDLT would still apply, because there is no general exemption for bare land. However, he considered that the plot should be treated as non-residential rather than residential.

In anonymised form, his reasoning was:

There is no exemption for undeveloped land, so SDLT does apply. The real issue is classification under section 116 Finance Act 2003.

Planning permission and dug footings do not automatically mean the land is “in the process of being constructed as a dwelling”. There usually needs to be a recognisable building in the course of construction, not just site preparation or excavation.

If the plot had already been legally separated and registered as its own title before the nearby house was bought, it is difficult to say that it still forms part of that house’s garden or grounds.

On those facts, the land is more likely to be non-residential, so the non-residential SDLT rates should apply.

Nick also noted that linked transaction rules would need to be considered, but that separate buyers and separate transactions do not become linked merely because the parties are related. There must be a single scheme, arrangement or series of transactions within section 108 Finance Act 2003.

The Law

SDLT is charged by section 42 Finance Act 2003 on land transactions. Under section 43(1), a land transaction means an acquisition of a chargeable interest. Section 48(1) defines a chargeable interest broadly and includes estates and interests in land in England or Northern Ireland.

That means a purchase of land can attract SDLT even if there is no building on it.

The next step is classification. Section 116 Finance Act 2003 distinguishes residential property from non-residential property. Broadly, residential property includes:

• a building used or suitable for use as a dwelling;
• a building that is in the process of being constructed or adapted for use as a dwelling; and
• land that is or forms part of the garden or grounds of such a building.

If the subject matter does not fall within that definition, it is non-residential for SDLT purposes.

For rate purposes, section 55 Finance Act 2003 applies different tables depending on the nature of the transaction. For non-residential transactions, the usual rate bands are:

• 0% on the first £150,000;
• 2% on the portion from £150,001 to £250,000; and
• 5% on the portion above £250,000.

Section 108 Finance Act 2003 deals with linked transactions. Separate purchases can be linked if they form part of a single scheme, arrangement or series of transactions between the same buyer and seller, or connected persons. Section 44(11) Finance Act 2003 applies section 1122 Corporation Tax Act 2010 for connected persons rules.

Analysis

The analysis usually has four stages.

First, SDLT is not avoided simply because the subject matter is a plot of land. Bare land is still land, and buying it is still a land transaction. So the suggestion that no SDLT at all is payable would usually be wrong.

Second, the plot must be classified. Here there was no completed dwelling on the land. The harder question is whether the plot was land on which a dwelling was “in the process of being constructed”. Earlier arguments sometimes focused on whether planning permission, foundations, drainage works or other preparatory works were enough. The courts have now taken a relatively demanding approach.

In Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the Court of Appeal confirmed that the condition thresholds in “not suitable for use” and related dwelling-status disputes are now relatively high. Although that case concerned suitability for use as a dwelling in an uninhabitable property context, it reinforces the wider point that SDLT dwelling tests are not satisfied or displaced by light, superficial or early-stage facts. In practical terms, mere groundwork or excavated footings are unlikely, without more, to amount to a building recognisably in the course of construction as a dwelling.

Third, the separate plot must be tested against the “garden or grounds” limb. If land is still part of the grounds of an existing dwelling, it may still be residential even if there is no building on the plot itself. But where the land has already been subdivided, separately registered, and is being sold as an independent development plot, that points away from it remaining part of the garden or grounds of the neighbouring house. The historical fact that it used to be garden land is not decisive.

Fourth, if the plot is neither a dwelling, nor land with a dwelling recognisably under construction, nor garden or grounds of a dwelling, it will generally be non-residential land.

On the facts described, that leads to the following result:

• the purchase is chargeable to SDLT because it is an acquisition of land;
• the plot is unlikely to be residential property under section 116;
• the non-residential rate table should therefore apply; and
• on a price of £160,000, the SDLT would usually be £200.

The calculation is straightforward:

• 0% on the first £150,000 = £0
• 2% on the remaining £10,000 = £200
• total SDLT = £200

The linked transactions point should still be checked carefully. If the purchase of the house and the purchase of the plot were genuinely separate, with different buyers and no contractual or practical interdependence, they are less likely to be linked. Family relationship alone does not automatically make transactions linked.

Outcome

The practical conclusion is that SDLT is likely to be payable, but at the non-residential rates rather than at 5% on the full purchase price.

On the stated facts, a separate plot of land with planning permission and dug footings, but with no building above ground and no continuing status as garden or grounds of a dwelling, is more likely to be non-residential property for SDLT purposes. On a £160,000 purchase, that would usually produce SDLT of £200.

Practical Steps

If you are assessing a similar purchase, check the following:

• whether the land has its own separate Land Registry title;
• whether it was legally separated before or only at the same time as a related house sale;
• what physical works actually exist on the land, and whether there is any recognisable building under construction rather than just preparation works;
• whether the plot still functions as part of the garden or grounds of a dwelling in fact and in law;
• whether there is any contractual link, conditionality, or wider arrangement connecting the plot purchase with another purchase; and
• whether the SDLT return has been prepared using the correct classification and rate table.

Useful evidence may include the title register and title plan, planning documents, photographs of the site at the effective date of transaction, contract papers, and any correspondence showing the transactions were negotiated separately.

Conclusion

Buying undeveloped land does not mean SDLT disappears. The real issue is whether the land is residential or non-residential. Where a plot has been split off as a separate title, no dwelling exists, and only limited groundwork such as footings has been carried out, the better view is often that the land is non-residential. In a case like this, the SDLT charge would usually be modest rather than 5% of the whole price.

Legal References Used

• Finance Act 2003, section 42
• Finance Act 2003, section 43(1)
• Finance Act 2003, section 48(1)
• Finance Act 2003, section 55
• Finance Act 2003, section 108
• Finance Act 2003, section 116
• Finance Act 2003, section 44(11)
• Corporation Tax Act 2010, section 1122
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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