Stamp Duty Land Tax exemptions and reliefs explained

Please be advised that the information in this article regarding QNUPS and IHT is no longer accurate due to the recent changes announced in the UK Budget. Starting in April 2025, the regulations will have significant implications that may affect your understanding of these topics. We encourage you to stay informed and consult with a Soteria Trusts expert to navigate these changes effectively.

Last time we looked at the stamp duty land tax (SDLT) situation from an overall perspective. Every property sold in the UK for more than £40,000 is assessed for SDLT, and the amounts due are to be reported and paid to HMRC within 14 days of completion. We looked at some examples of sales at different price levels, how SDLT is calculated during the current holiday, and then how it will be calculated when things revert to normal. The holiday exempts SDLT from any properties purchased for less than £500,000 until 30th June 2021.

But let’s go back to basics. What is SDLT, and why is it there?

SDLT was introduced in the UK in 2003. The objective at the time was to eradicate what HMRC saw as ‘aggressive avoidance of taxes through very high-value transactions’. It was then a simple rate time value tax but has slowly evolved into one of the country’s most complex taxes. Now it slices property values and charges a different tax rate on each slice.

Pay first, refund later

HMRC will heavily fine you and charge interest if you underpay your SDLT, which is a self-assessed tax. They are equally cruel in remaining totally silent when there has been an overpayment. You will have a very long wait if you believe they will voluntarily refund you any overpayment. HMRC will fine you on a daily basis if you fail to submit a return reporting your purchase of the property within 14 days of completion, even when no SDLT is payable.

SDLT surcharge for second property buyers

When the Government introduced the 3% SDLT surcharge for additional dwellings, it was intended to suppress buy-to-let landlords from buying properties. Of course, this also hit people who wanted to buy a holiday home or other type of second property, which would not affect the first-time buyer market.

Stamp Duty Land Tax: a complicated maze

HMRC then began to introduce a number of exceptions, reliefs, and qualifying criteria intended to ease the burden on these second property owners. What actually happened was that these regulations created a mire that almost everyone could fall into and be swallowed. Professionals such as conveyancing solicitors are still baffled today by the complexities of SDLT. Many do not understand the rules that have been cloaked upon them by stealth only to add a further layer of accountability to their service. They usually continue to calculate SDLT in the simple way they know, oblivious to the complexities which exist.

Other professionals, such as accountants, estate agents, and mortgage brokers, will refer you to your conveyance if there are any questions about the SDLT on your purchase. This is because they do not understand the tax and how it is calculated.

SDLT exemptions

Some of the exceptions which had to be introduced are, for example, where a property has an annexe or granny flat. Other reliefs include wayleaves, rights of way, mixed-use and so on. These properties were attractive to buyers who genuinely cared about an older generation for whom they wanted to provide and yet leave independent. The acquisition of a consolidated property enabled families to do this for their older generations. But the SDLT swamp soon began to swallow these up. This is just one of 37 SDLT reliefs that have been introduced to ease the unfair burden on property buyers who have been unfairly disadvantaged.

SDLT surcharge for non-residents

The quagmire continues to deepen as we see the introduction of an additional 2% surcharge from April this year, affecting buyers who are residents overseas. If you are an expatriate working abroad with roots in the UK and you want to purchase a property here whilst you are resident overseas, you will be burdened with this new layer. 

The end of the SDLT holiday

Then, of course, we are currently in the SDLT holiday period, which is due to end in two phases: June 30th and September 30th. Will it be extended to try and account for the charges of transactions that are underway? If so, will that create an even greater stampede?

At this time, SDLT is a complex property tax that is certainly confusing and unfair to all. However, if you engage a specialist who understands this jungle of complexities and mazes, you will find clear and concise advice and action on your behalf to minimise your SDLT burden. The specialist will secure a partial refund if your transaction is within the last four years when you have to make a claim. You can also fill in this online SDLT refund questionnaire which will help you determine whether you might qualify for the stamp duty land tax refund.

This article has been written by Andrew Wood.

Connect with him on LinkedIn: https://www.linkedin.com/in/andrewwoodbca