When Do I Need to Pay Stamp Duty Land Tax?

Introduction

Stamp Duty Land Tax (SDLT) is a tax you pay when you buy property or land in England and Northern Ireland. You must tell HMRC about most property transactions within 14 days of completion, even if you don't owe any tax. However, certain transactions are exempt and don't require a return at all.

What is Stamp Duty Land Tax?

SDLT applies to property and land purchases in England and Northern Ireland only. If you're buying property in Scotland, you pay Land and Buildings Transaction Tax instead. In Wales, you pay Land Transaction Tax.

When you complete a property transaction, you're responsible for reporting it to HMRC and paying any tax due. Most people use a solicitor or legal conveyancer to handle this on their behalf, but you can do it yourself if needed.

When must you pay SDLT?

You must submit your SDLT return and pay any tax due within 14 days of the 'effective date' of your transaction. The effective date is usually the date the transfer completes (when ownership legally passes to you).

However, the effective date can be earlier if the contract is 'substantially performed' before completion. Substantial performance happens when:

• Most of the purchase price is paid (normally 90% or more, whether in cash or something else of value)
• You take possession of the property
• You make the first rent payment (for leasehold properties)

This 14-day deadline applies whether or not you owe any tax. Missing this deadline can result in penalties, so it's important to act quickly after your transaction completes.

Transactions that don't need a return

Not every property transaction requires you to tell HMRC. You don't need to file an SDLT return for:

Transactions with no payment

If no money or other payment changes hands, you don't need to pay SDLT or file a return. 'Payment' in this context includes not just cash, but also goods, services, debt releases, or taking over a mortgage.

Property inherited through a will

Property left to you in a will is almost always exempt from SDLT, even if it has an outstanding mortgage. This exemption also applies if the terms of a will are changed within 2 years of someone's death, as long as a different beneficiary receives the property and doesn't pay any compensation (including taking over a mortgage).

Divorce or civil partnership dissolution

When couples divorce, separate, or end their civil partnership, any property transfers between them are exempt from SDLT. This applies whether they agree to split property between themselves or do so under a court order.

Freehold purchases under £40,000

You don't need to pay SDLT or tell HMRC about freehold property transactions with a total chargeable consideration (the amount paid) of less than £40,000. This exemption doesn't apply if the transaction is linked to other transactions that, when added together, exceed this threshold.

Leasehold transactions that don't need a return

Leasehold transactions have their own exemption rules depending on the lease length.

Leases of 7 years or more

You don't need to tell HMRC or pay SDLT when you buy a new or assigned lease of 7 years or more, provided the premium (upfront payment) is less than £40,000 and the annual rent is less than £1,000.

Similarly, if you assign or surrender a residential or non-residential lease granted for 7 years or more, you don't need to file a return if the chargeable consideration is less than £40,000.

Leases under 7 years

For leases shorter than 7 years, you don't need to pay SDLT or file a return if the chargeable consideration is below the residential or non-residential SDLT threshold.

For new leases, chargeable consideration includes both any premium paid and the net present value of the rent over the lease term. For assigned or surrendered leases, it includes the consideration given for the assignment or surrender. You can use HMRC's Stamp Duty Land Tax calculator to work out the net present value of rent payments.

How to submit your SDLT return

If your transaction does require a return, the process depends on whether you're using professional help.

Using a solicitor or conveyancer

Most people use a solicitor or legal conveyancer to submit their SDLT return online. Once they have authority to act on your behalf and know the effective date of your transaction, they can file the return through HMRC's Stamp Taxes Online service or approved commercial software.

After submission, you'll receive an SDLT5 certificate and a Unique Transaction Reference Number (UTRN). The SDLT5 certificate must be sent to HM Land Registry when you register the property.

Submitting yourself

If you're not using a solicitor or conveyancer, you must use the paper SDLT1 return form. You can order this online or by phone from HMRC.

Send your completed SDLT1 to HMRC within 14 days of the effective date. Each form has a unique UTRN printed on it, so you cannot photocopy forms for different transactions. Allow at least 3 working days for your return to reach HMRC.

The most secure way to pay any SDLT due is electronically, though you can send payment with your paper return. Don't include other correspondence with your SDLT1, as this may delay your certificate.

Additional forms for complex transactions

Some transactions need extra forms alongside the main return:

• SDLT2: When there are more than 2 buyers or sellers
• SDLT3: When the transaction involves more than one property
• SDLT4: For complicated leases, commercial transactions, or situations involving business sales, company buyers, or dependent consideration

If you're filing online and have more than 99 combined entries for properties, buyers, or sellers, you'll need to create a separate schedule for additional entries and send it to the Stamp Duty Land Tax office with the UTRN.

Sources

• Stamp Duty Land Tax online and paper returns
• Stamp Duty Land Tax: transactions that don't need a return

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.