Stamp Duty Land Tax (“SDLT”), the tax paid on all manner of property purchases, has changed considerably in recent years.

It doesn’t just apply to house and flat purchases but also includes the grant or variation of a lease.

The following will also be considered residential property for SDLT purposes:

• residential accommodation for school pupils;
• residential accommodation for students (other than a hall of residence);
• residential accommodation for members of the armed forces, or
• an institution which is the sole or main residence of at least 90% of its residents.

The current method of calculation operates on a “slice system” so only that portion of the purchase price that falls within a particular band will be calculated at that rate.

The current rates of SDLT are as follows:-

Purchase price bands (£)	Percentage Rate
Less than £125,000	0%
£125,001 – £250,000	2%
£250,001 – £925,000	5%
£925,001- £1.5 million	10%
More than £1.5 million	12%
Penalty rate if the buyer is a “non-natural person” chargeable consideration is over £500,000	15%

A working example of the slice system for a residential property worth £1.5 million is as follows:-

Purchase price band (£)	Percentage rate (%)	SDLT due (£)
Less than £125,000	0	0
£125,001 – £250,000	2	2,500
£250,001 – £925,000	5	33,750
£925,001- £1.5 million	10	57,500
More than £1.5 million	12	0
	Total SDLT due	93,750

Since March 2016 there has been an additional 3% SDLT charged on the purchase price on second homes and buy to let properties.

Where a residential lease has no premium but a rent higher than £1000 per annum, SDLT is calculated on, what is known as, the Net Present Value (“NPV”) of the rent payable over the term of the lease. The minimum threshold for residential leases is £125,000. If that threshold is exceeded, the excess NPV attracts SDLT at 1%. For example, at the date of this blog, the SDLT on a lease with no purchase price but a rent set at £50,000 per annum for a term of twenty years would be £5,856.

For further information regarding Stamp Duty Land Tax or any other property matters, please contact Nicky Cleightonhills on ncleightonhills@meaby.co.uk or +44 (0) 207 703 5034.