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SDLT and LTT for Leases

What is Stamp Duty Land Tax (SDLT)?

SDLT is a tax charged on land transactions on the acquisition of a chargeable interest. This includes the grant of a lease.

SDLT is not charged on a tenancy at will or a licence to occupy, however, care should be taken to ensure that the tenancy at will or licence to occupy is not in fact a lease.

When does SDLT become payable?

SDLT is payable from the date of the grant of the lease. It is important to note that this applies even if the commencement date of the lease is at some point in the future.

SDLT can also be payable by a landlord on the surrender of a lease for a premium.

How is SDLT calculated?

SDLT is payable on any money or money’s worth paid for the transaction. SDLT is payable both on any rent and any premium paid when a lease is granted. This includes any VAT payable on the rent or premium.

SDLT is charged on the net present value of the rent, which is a calculation of the value of the rents payable under the lease during the term of the lease. Currently, the SDLT rates for commercial or mixed-use properties are:

Net present value Rate
£0 to £150,000 0%
Over £150,000 but not more than £5 million 1%
Over £5 million 2%

SDLT is charged on the premium paid for commercial or mixed-use property and the current rates are as follows:

Consideration Rate
Not more than £150,000 0%
More than £150,000, but
not more than £250,000
2%
More than £250,000 5%

If both rent and a premium are payable, the SDLT is calculated separately on each element and then added together.

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 net present value of rent. The current rates are as follows:

Net present value Rate
Not more than £225,000 0%
More than £225,000 but not more than £2 million 1%
More than £2 million 2%

LTT is currently charged on the premium as follows:

Consideration Rate
Not more than £225,000 0%
More than £225,000 but not more than £250,000 1%
More than £250,000 but not more than £1 million 5%
More than £1 million 6%

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.

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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