Do You Pay Stamp Duty On Land?

Stamp duty, a property transaction tax that's often overlooked, can add a significant amount to the overall cost of purchasing land or property in the UK. This tax is applicable to most land and property purchases above a certain threshold, but there are some exceptions. So, do you pay stamp duty on land in the UK?

In this insight, we will explore the details of stamp duty, answering questions such as, do you pay stamp duty on land and do you pay stamp duty on farming land?

Key Takeaways

• Stamp Duty Land Tax (SDLT) is a property transaction tax applicable to land and property purchases over a certain threshold in the UK, including both residential and non-residential properties.
• Stamp duty on land is similar to stamp duty on property and is considered a type of land tax, with specific rates and exemptions.
• First-time buyers can benefit from a stamp duty exemption on land purchases up to certain price thresholds, varying in different parts of the UK.
• SDLT applies to land purchases regardless of planning permission, but the valuation of land without planning permission may result in a lower SDLT obligation.

Do You Pay Stamp Duty On Land?

Yes, you do pay stamp duty on land in the UK. Stamp Duty Land Tax (SDLT) is applicable to most land purchases above a certain threshold, including both residential and non-residential land.

The rates and thresholds for SDLT vary depending on the type of property and the circumstances of the buyer. For residential land purchases, the SDLT rates start at 0% for properties up to £125,000, and then progressively increase for higher purchase prices. There are also different rates and thresholds for first-time buyers and additional properties.

Stamp Duty

Stamp Duty Land Tax (SDLT) is a tax levied on the purchase of property or land over a certain value in England and Northern Ireland. In Scotland and Wales, similar taxes - Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT) respectively - are imposed. The tax is named after the old system of using paper stamps to denote the payment of tax.

This tax applies to both residential and non-residential properties. However, the tax rates, brackets, and exceptions vary. Most importantly, SDLT is applicable not only to property purchases but also to land purchases.

Stamp Duty on Land - Is it the Same as Land Tax?

Just as stamp duty applies to property purchases, it also applies when buying land. This is sometimes referred to as a kind of land tax. This tax is mandatory for both residential and non-residential land purchases above a certain price bracket in England and Northern Ireland.

Stamp Duty Exemption for First-Time Buyers

First-time buyers are entitled to a stamp duty exemption on their land purchase, just as they are for their first property purchase. In England and Northern Ireland, no SDLT payment is required on the first £300,000 of a property costing less than £500,000 in total. However, the rules vary in Scotland and Wales, where the exemption is for land purchases up to £175,000 and £180,000, respectively.

Do you Pay Stamp Duty on New Builds?

When buying a new build property, SDLT can sometimes pose a barrier. However, there's a legal alternative that can lead to substantial SDLT savings. Some developers may allow you to buy a plot of vacant land and simultaneously enter into a building contract for the construction of the dwelling. In this case, the stamp duty on the building plot will be much less than if you were buying the fully built house.

Do You Pay Stamp Duty On Land with Planning Permission?

A common query is: Do you pay stamp duty on land with planning permission? The answer is yes. SDLT applies to land purchases whether or not they have planning permission. However, the SDLT obligation can be structured in a more advantageous way when you buy land with planning permission and then enter into a building contract.

Do You Pay Stamp Duty on Farming Land?

Another question often asked is: Do you pay stamp duty on farming land? The answer is yes, but with a caveat. Agricultural land that's part of a working farm or used for agricultural reasons is classified as non-residential property, and SDLT applies. However, if agricultural land is sold as part of the garden or grounds of a dwelling, residential SDLT rates apply.

Do You Pay Stamp Duty on Land without Planning Permission?

A further query that arises is: Do you pay stamp duty on land without planning permission? The answer is yes, SDLT applies regardless of whether the land has planning permission or not. However, the valuation of land without planning permission might be lower, resulting in a lower SDLT obligation.

Do You Pay Stamp Duty If You Buy a Second Piece of Land?

Yes, you may be required to pay Stamp Duty Land Tax (SDLT) on a second piece of land in the UK. This is the same tax as the second home stamp duty. The SDLT rules and rates for additional properties, including second homes and buy-to-let properties, are different from those for primary residences.

If you already own a property, purchasing an additional piece of land would generally be considered an additional property transaction subject to SDLT. The SDLT rates for additional properties start at 3% for properties up to £125,000 and increase progressively for higher purchase prices.

Buying Land With a Mortgage

The purchase of land can be funded through a land mortgage, a long-term secured loan that uses the land as collateral. Like with a standard mortgage, if you can't make payments, your land may be repossessed.

The criteria for a land mortgage can vary depending on how the land will be used.

In the UK certain plots of land are designated for specific purposes, for example, Amenity Land. Seeking legal advice may be necessary to change the status of the land. As an example, if you purchase agricultural land it cannot be used to build residential properties. With the right advice, you can change the land status, but this can take time and is costly.

If you are considering buying land, start by researching the type of land mortgage you need. 

Stamp Duty on Land Final Thoughts

So, do you pay stamp duty on land? Yes, you do, but the rates and thresholds vary depending on the type and use of land, as well as the buyer's circumstances. It's essential to consider this cost when budgeting for a land or property purchase to avoid unexpected expenses. Understanding SDLT (Stamp Duty Land Tax) can help you plan better and save money.

Source: Gov.uk