When purchasing property in the UK, the tax you pay on the transaction can vary depending on where the property is located. In England and Northern Ireland, property buyers are subject to Stamp Duty Land Tax (SDLT), but if you’re buying property in Scotland or Wales, different taxes apply. In Scotland, buyers pay the Land and Buildings Transaction Tax (LBTT), and in Wales, the Land Transaction Tax (LTT) applies.
Understanding the differences between SDLT, LBTT, and LTT is essential, especially if you’re buying property across the UK. This guide will break down each tax and explain how the systems differ in terms of rates, thresholds, and reliefs.
What is Stamp Duty Land Tax (SDLT)?
Stamp Duty Land Tax (SDLT) is the tax payable on property purchases in England and Northern Ireland. The rates for SDLT are tiered, meaning that different portions of the property’s price are taxed at different rates. Here are the SDLT rates for residential property in 2024:
- Up to £250,000 – 0%
- £250,001 to £925,000 – 5%
- £925,001 to £1.5 million – 10%
- Above £1.5 million – 12%
If you’re a first-time buyer, you can benefit from First-Time Buyer Relief, which means no stamp duty is payable on properties up to £425,000, and reduced rates apply for homes between £425,001 and £625,000.
Additionally, there is a 3% surcharge for second homes and buy-to-let properties, and non-UK residents face an additional 2% surcharge on top of the standard rates.
Land and Buildings Transaction Tax (LBTT) in Scotland
Land and Buildings Transaction Tax (LBTT) is the equivalent of stamp duty in Scotland. Introduced in 2015, LBTT replaced SDLT, with the Scottish government setting its own thresholds and rates.
Here are the LBTT rates for residential properties in 2024:
- Up to £145,000 – 0%
- £145,001 to £250,000 – 2%
- £250,001 to £325,000 – 5%
- £325,001 to £750,000 – 10%
- Above £750,000 – 12%
Key Differences in LBTT:
- Lower Zero-Rate Threshold: In Scotland, no LBTT is payable on the first £145,000 of a property’s value, compared to £250,000 under SDLT in England. This means buyers in Scotland start paying tax on lower-priced properties compared to buyers in England and Northern Ireland.
- Higher Rates on High-Value Properties: The highest LBTT rate of 12% applies to properties over £750,000, whereas the highest SDLT rate of 12% only kicks in on properties over £1.5 million. This makes high-value properties more expensive in Scotland than in England or Northern Ireland.
- Additional Dwelling Supplement: Like SDLT, there is a surcharge for additional properties in Scotland. Known as the Additional Dwelling Supplement (ADS), this surcharge is currently 4% on top of standard LBTT rates, which is higher than the 3% surcharge in England.
Land Transaction Tax (LTT) in Wales
In Wales, the equivalent tax to SDLT is known as Land Transaction Tax (LTT). LTT replaced SDLT in 2018 when the Welsh government took control of property transaction taxes. The rates and thresholds for LTT differ from both SDLT and LBTT.
Here are the LTT rates for residential properties in 2024:
- Up to £225,000 – 0%
- £225,001 to £400,000 – 6%
- £400,001 to £750,000 – 7.5%
- £750,001 to £1.5 million – 10%
- Above £1.5 million – 12%
Key Differences in LTT:
- Different Thresholds: In Wales, LTT begins at £225,000, lower than the £250,000 zero-rate threshold in England and Northern Ireland. However, it is higher than the threshold in Scotland, where LBTT starts at £145,000.
- Higher Mid-Tier Rates: The LTT rate on properties between £225,001 and £400,000 is 6%, which is higher than the 5% SDLT rate for properties between £250,001 and £925,000 in England. This makes purchasing mid-range properties more expensive in Wales compared to England.
- Surcharge on Second Homes: Like in England and Scotland, Wales also has a surcharge for second homes and buy-to-let properties. This Additional Residential Property (ARP) surcharge is currently set at 4%, similar to Scotland’s ADS.
Which System is More Beneficial?
Whether SDLT, LBTT, or LTT is more beneficial depends largely on the property’s value and location. Here’s a quick comparison of the three systems:
- First-Time Buyers: England and Northern Ireland offer more generous relief for first-time buyers with no stamp duty on properties up to £425,000. Scotland and Wales do not have as extensive reliefs.
- High-Value Properties: High-value properties are generally taxed more heavily in Scotland and Wales than in England due to lower thresholds and higher top-end rates.
- Second Homes and Investments: Scotland and Wales impose a 4% surcharge on second homes and buy-to-let properties, which is higher than the 3% surcharge in England.
