Property taxation (SDLT, VAT, CGT)

PP.10 Property Taxation — SDLT, VAT, CGT

Three taxes bite on property transactions. Get the buyer/seller split and the residential/commercial split right.

SDLT (Stamp Duty Land Tax) — the BUYER's tax

• Charged on the chargeable consideration for a land transaction in England/NI (Finance Act 2003). (Wales = LTT; Scotland = LBTT — out of scope but know the names.)
• Residential nil-rate threshold: £125,000, then banded rates rising on the slice. Higher rates apply to additional dwellings and to non-resident/corporate buyers.
• First-time buyers' relief gives a higher nil-rate band (relief withdrawn above the FTB cap).
• VAT is part of the consideration — SDLT is charged on the VAT-inclusive price for opted commercial property.
• Filing/payment: SDLT return filed and tax paid within 14 days of completion (not 30). The buyer's solicitor handles this; SDLT5 certificate is needed to register the buyer at HM Land Registry.

VAT — mostly the SELLER's concern

• Land/buildings are exempt by default, with exceptions.
• Standard-rated (20%): new (≤3 years old) commercial buildings; the sale of a freehold "new" commercial building.
• A landlord/seller of old commercial property can opt to tax to recover input VAT — this turns an exempt supply into standard-rated, adding 20% to price and to the buyer's SDLT.
• New-build residential = zero-rated; most residential resales/lettings = exempt. A TOGC (transfer of a going concern, e.g. a tenanted investment property) is outside the scope of VAT if conditions met.

CGT — the SELLER's tax on the gain

• Charged on the disposal gain. Residential CGT rates 18%/24% (basic/higher) since 30 Oct 2024; annual exempt amount £3,000.
• PRR (private residence relief) exempts the gain on an only/main home (TCGA 1992 s.222–223); final-period exemption applies.
• Reporting trap: UK residential property gains must be reported and CGT paid via a CGT-on-property-account return within 60 days of completion (separate from SDLT's 14 days).
• Companies pay corporation tax on gains, not CGT.

Common traps

• 14 days SDLT vs 60 days CGT — different deadlines, different parties.
• Option to tax inflates both VAT and SDLT.
• Don't confuse "new" residential (zero-rated) with "new" commercial (standard-rated).