Stamp Duty Land Tax: Current situation and developments since 2020

Stamp Duty Land Tax (SDLT) is a charge on the purchase of residential property (exclusively used as a dwelling) as well as the purchase of property used for commercial purposes. The property buyer is liable to pay SDLT, which is administered by HM Revenue and Customs (HMRC).

SDLT only applies to England and Northern Ireland; the equivalent in Scotland is the Land and Buildings Transaction Tax, and in Wales the Land Transaction Tax.

How Stamp Duty Land Tax works

SDLT is charged on a ‘slice’ basis. This means that different rates apply to different portions of the overall property price. This is a similar design to that of income tax. The first ‘slice’ of the property price (currently £250,000) is charged at a 0% rate, meaning no SDLT is payable up to that amount. This is known as the nil-rate band (NRB).

Additional charges and reliefs available

Those purchasing an additional property may be liable for an additional SDLT rate of 3%. There are reliefs available for first-time buyers (known as the First Time Buyers’ Relief). Additionally, non-residents in the UK and buyers of additional properties (such as a second home) may be liable to surcharges on top of regular SDLT rates.

Recent changes to SDLT

The current SDLT rates and thresholds are temporary. SDLT rates were reduced on 23 September 2022 by then Chancellor Kwasi Kwarteng and will return to their previous levels on 1 April 2025.

There is precedent for the use of a temporary SDLT relief. Recently, it has been employed by Rishi Sunak when he was Chancellor to stimulate the housing market during the Covid-19 pandemic. This temporary SDLT relief applied between 8 July 2020 and 30 September 2021. In September 2022, then Chancellor Kwasi Kwarteng announced a permanent reduction to SDLT, effective that day. However, the subsequent Chancellor, Jeremy Hunt announced that the reduction would become temporary in the Autumn Statement in November 2022.

Property transaction taxes in Scotland and Wales

SDLT is a devolved tax, and only applies to property transactions in England and Northern Ireland. Scotland replaced SDLT with the Land and Buildings Transaction Tax (LBTT) in 2015, and Wales with the Land Transaction Tax (LTT) in 2018. The two devolved taxes share most features with SDLT, but different rates and thresholds apply. Neither LBTT nor LTT have a non-resident surcharge as SDLT does, and there is no First Time Buyers’ Relief in Wales.

Current SDLT, LBTT, and LTT rates

Table 1 shows the current rates of SDLT, LBTT, and LTT.

Proposals for reform

Although SDLT reliefs were welcomed by MPs and commentators alike, – particularly during the Covid-19 pandemic – most economists say that the design of SDLT is detrimental to the housing market and to labour mobility, regardless of where the rates are set. For example, the Institute for Fiscal Studies has consistently called for the tax to be abolished. The Treasury Committee, in an inquiry on tax after coronavirus (PDF), said in its report that SDLT should be treated as a priority for reform after the pandemic.

Although most of the existing commentary focuses on SDLT in England and Northern Ireland, similar considerations also apply to LBTT in Scotland and LTT in Wales because the taxes are so similar.