Stamp duty land tax on residential property: government policy up to 2021

A second Commons Library briefing covers developments from 2020.

What is stamp duty land tax (SDLT)?

Stamp duty land tax (SDLT) is charged on the purchase of property or land, paid by the purchaser when that property or land is bought. SDLT applies in England and Northern Ireland. There are separate property transaction taxes in Scotland (the Land and Buildings Transaction Tax) and Wales (the Land Transaction Tax), which are relatively similar in design to SDLT.

The amount of SDLT due on the purchase of a property depends on several factors; primarily, the type of property sold (that is, where it is used for residential or commercial purposes), the price of the property, and who the purchaser is.

The rates of SDLT are graduated so that more expensive properties face progressively higher tax rates. SDLT is charged on a ‘slice’ basis: rates only apply to the part of the property’s selling price that falls within designated value bands. This ‘slice’ design is similar to income tax.

The main statutory provisions governing SDLT are consolidated in part 4 of the Finance Act 2003, as amended.

In the past the term ‘stamp duties’ has been used to refer to both the tax on property transactions and the tax on the purchase of stocks and shares. The term came from the fact that historically stamps on documents, following their presentation to the Stamp Office, indicated payment. With the introduction of SDLT in 2003, separate taxes were introduced on the paperless purchase of shares (Stamp Duty Reserve Tax), and shares bought on a stock transfer form (Stamp Duty).

How much does SDLT raise?

In 2021/22 SDLT raised £14.1 billion. Receipts from residential properties were £10.17 billion, accounting for almost three quarters of total receipts.

The Office for Budget Responsibility (OBR) publishes statistics on historic receipts and projected revenues from SDLT, as well as its Scottish and Welsh equivalents. In March 2023 the OBR forecast that in 2023/24 SDLT would raise £11.5 billion, while its Scottish and Welsh equivalents would raise £700m and £300m respectively.

How has SDLT been reformed in recent years?

Historically SDLT on residential property has been charged at a single rate on the whole purchase price of a property, with different rates for different value bands. When the sale price of a property exceeded the threshold for a higher rate of duty, tax would be charged on a ‘slab’ basis, at the higher rate on the whole value of the sale rather than the part of the price above the threshold.  In addition SDLT was charged at the same rate of tax irrespective of the number of residential properties owned by the buyer.

Both of these aspects of SDLT on residential property have been reformed in recent years: in 2014 the design of the tax was changed to being charged on a ‘slice’ basis; and in 2016 a new higher rate of tax was introduced for purchasers who already own a residential property. The Government introduced a new SDLT relief for first-time buyers in 2017, and a temporary SDLT ‘holiday’ in 2020 as part of its response to the Covid-19 pandemic.

Further reading

While this briefing discusses these reforms to the taxation of residential property, a second Commons Library briefing – Tackling the under-supply of housing in England – covers trends in housing supply and barriers and potential solutions to delivering more homes in England.

Guidance on SDLT is collated on Gov.uk. This includes an online calculator for those who wish to determine how much duty they are liable to pay, on transactions for both residential and commercial property. HM Revenue and Customs published detailed technical guidance in their Stamp Duty Land Tax Manual