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SDLT and LTT for Investment Purchases

What is Stamp Duty Land Tax (SDLT)?

SDLT is a tax charged on land and property transactions in England on the acquisition of a chargeable interest. This includes the purchase of second and additional properties or buy to lets.

When does SDLT become payable?

SDLT is payable at a higher rate on the purchase of second homes.  The higher rate will apply were after completion, you own more than one property (that is, that the property being purchased is not replacing your current home).  First time buyers on the other hand pay SDLT at the standard rate and may be subject to SDLT relief.  However, the threshold for SDLT on second homes is significantly lower meaning that you will start paying SDLT on a purchase starting at £40,000.

How is SDLT calculated?

SDLT is payable on any money or money’s worth paid for the transaction. SDLT is payable on the purchase price paid for your second home. This includes any VAT payable on the transaction.

The current rates are as follows:

Purchase price Rate
£0 to £40,000 0%
Over £40,000 but not more than £125,000 3%
Over £125,000 but not more than £250,000 5%
Over £250,000 but not more than £925,000 8%
Over £925,000 but not more than £1.5 million 13%
Over £1.5 million 15%

What are the timelines for paying SDLT?

A land transaction return must be delivered to HMRC and payment of any SDLT due paid to HMRC within 14 days of the date of the transaction.

What is Land Transaction Tax (LTT)?

LTT replaced SDLT for transactions in Wales in 2018. The LTT regime in Wales is largely similar to the SDLT regime in England. Some of the key differences are mentioned below.

What are the LTT rates?

The LTT rates and thresholds differ to the SDLT rates and thresholds.

LTT is charged on the purchase price in a transaction as follows:

Purchase price Rate
£0 to £40,000 0%
Over £40,000 but not more than £180,000 3%
Over £180,000 but not more than £250,000 7.5%
Over £250,000 but not more than £400,000 9%
Over £400,000 but not more than £750,000 11.5%
Over £750,000 but not more than £1.5 million 14%
Over £1.5 million 16%

Payment of LTT

The submission deadline for a land transaction return and payment of any LTT due is within 30 days of the effective date of the transaction.

Will I always have to pay higher SDLT/LTT on a second home?

There are some exceptions where you will not have to pay tax at the higher rate for your second home, which include:

  • If your additional home costs less than £40,000;
  • If you inherit a property;
  • If you receive property as a gift;
  • If you have sold your previous main residence;
  • If you buy a home of a ‘semi-permanent nature’ such as caravans or static homes; and
  • If the second home is a mixed-use property.

If you need any advice on SDLT or LTT, please contact a member of our commercial property law team in confidence here or on 02920 829 100 for a free initial call to see how they can help.

To speak to one of our experts today, please contact us on 02920 829 100 or by using our Contact Us form for a free initial chat to see how we can help.

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