Property and local taxes form a significant part of the UK tax framework, raising revenue for central and local government and affecting how individuals, investors, and businesses buy, own, lease, and occupy property. These taxes influence transaction costs, ongoing overheads, budgeting, and compliance for households and companies alike.
What this article is about
This gateway guide explains the core UK property and local taxes and how they fit together. It covers Stamp Duty Land Tax (SDLT) in England and Northern Ireland, Land and Buildings Transaction Tax (LBTT) in Scotland, and Council Tax and Business Rates across Great Britain. For completeness, it also signposts Wales’ devolved property transaction tax, Land Transaction Tax (LTT). For each tax we outline who pays, how liabilities are calculated, key reliefs, and compliance steps, with links to more detailed pages on each topic.
Property transaction taxes (SDLT, LBTT, and LTT) are usually encountered on acquisition or certain lease events, whereas Council Tax and Business Rates are recurring local charges linked to domestic and non-domestic occupation respectively. Understanding the differences, the devolved regimes, and the available reliefs helps purchasers, landlords, and occupiers plan effectively, remain compliant, and manage cash flow.
Section A: Stamp Duty Land Tax (SDLT)
Stamp Duty Land Tax (SDLT) is the principal property transaction tax in England and Northern Ireland. It applies when land or property is acquired for consideration above prescribed thresholds and can also arise on certain lease transactions. SDLT is charged on a slice-by-slice (progressive) basis for residential property and on distinct bands for non-residential and mixed-use transactions. Understanding scope, rates, reliefs, surcharges, and filing requirements is critical to budgeting and compliance for buyers and lessees.
1. What SDLT Applies To
SDLT is generally chargeable when a person or entity acquires a chargeable interest in land in England or Northern Ireland. Common chargeable transactions include:
- Purchases of residential property (freehold or leasehold)
- Purchases of non-residential or mixed-use property (e.g., offices, shops, land)
- Grants, assignments, and surrenders of leases, where liability may arise on the premium and on the net present value (NPV) of rent
Certain transactions are not chargeable or benefit from specific exemptions (for example, some transfers between spouses or civil partners, or where consideration is below the relevant threshold). Linked transactions, options, and contingent or uncertain consideration can affect the computation and timing of the charge, and specialist advice may be needed where structures are complex.
2. Current SDLT Rates and Thresholds
For residential property, SDLT is calculated using progressive bands. The buyer’s circumstances can alter the effective rate:
- Standard residential rates apply to most home purchases
- Higher rates for additional dwellings (the “3% surcharge”) generally apply where, at completion, the purchaser owns another residential property and is not replacing a main residence
- A 2% non-resident surcharge applies to most acquisitions by non-UK resident purchasers and is in addition to any other residential rates or the 3% surcharge
For non-residential and mixed-use property, separate bands and rates apply, typically resulting in a different liability profile from residential transactions. Where a transaction involves both residential and non-residential elements, mixed-use rules can apply to the whole consideration.
Note: Precise thresholds and bands change from time to time and may be subject to temporary measures. Always verify the applicable bands for the effective date of the transaction.
3. Reliefs and Exemptions
SDLT reliefs can significantly reduce the liability where the statutory conditions are met. Common examples include:
- First-time buyer relief for qualifying purchasers up to a specified property value cap, with reduced or nil rates within defined bands
- Multiple Dwellings Relief (MDR) for purchases of more than one dwelling in a single or linked transaction (subject to current legislative status and any reforms)
- Group relief for qualifying intra-group transfers and charities relief where the property is used for charitable purposes
Reliefs are tightly defined and evidence-led. Claims must be correctly made on the SDLT return, and records should substantiate eligibility. HMRC scrutiny of relief claims is common; errors can lead to assessments, penalties, and interest.
4. SDLT Compliance and Returns
Most notifiable transactions must be reported to HMRC on an SDLT return and any tax paid within 14 days of the effective date (usually completion or, for leases, the date of substantial performance). Conveyancers commonly file and pay on a client’s behalf, but the legal responsibility remains with the purchaser (or tenant for lease charges). Late filing or payment can trigger penalties and interest. Particular care is needed with:
- Linked transactions where multiple contracts are connected
- Variable/contingent consideration requiring later adjustments
- Lease computations involving NPV of rent and future variations
Section Summary
SDLT is a transaction-driven tax with progressive residential bands, distinct non-residential rules, and surcharges for additional properties and non-UK residents. The regime offers targeted reliefs, but strict eligibility and evidence standards apply. Accurate scoping, correct rate selection, timely 14-day filing, and careful completion of the SDLT return are essential to avoid penalties and unexpected costs.
You can read our extensive guide to Stamp Duty Land Tax here >>
Section B: Land and Buildings Transaction Tax (LBTT)
In Scotland, property transactions are subject to Land and Buildings Transaction Tax (LBTT), which replaced SDLT in 2015 as part of devolved taxation powers. LBTT is administered by Revenue Scotland and applies to both purchases and certain lease transactions. While conceptually similar to SDLT, LBTT has its own rate bands, surcharges, reliefs, and compliance regime that reflect Scottish housing and property policy.
1. Scotland’s Property Tax System
LBTT applies to acquisitions of both residential and non-residential property, and to certain leases. The main chargeable transactions include:
- Purchases of residential dwellings above the nil-rate threshold
- Purchases of non-residential property such as offices, retail units, or land
- Grants and assignments of leases, where liability arises on the premium and on the net present value of rent
Like SDLT, LBTT is structured as a banded system with progressive rates, but the devolved Scottish Government sets the specific thresholds and rates.
2. LBTT Rates and Bands
Residential LBTT rates are charged progressively, with higher portions of the purchase price taxed at higher bands. An Additional Dwelling Supplement (ADS) is payable on most second homes and buy-to-let purchases. Non-residential and mixed-use transactions follow separate bands. Leases are subject to LBTT on both the premium and the net present value of rent over the lease term.
3. LBTT Reliefs and Additional Dwelling Supplement
Reliefs are available to reduce liability in defined circumstances, including:
- First-time buyer relief, which reduces liability for qualifying purchases up to a specified limit
- Charities relief for qualifying acquisitions by charitable bodies
- Group relief for transfers between members of the same corporate group
The Additional Dwelling Supplement (ADS) is currently set at a percentage of the purchase price and applies in addition to the main residential rates. ADS may be reclaimed if the purchaser sells their previous main residence within 18 months of acquiring the new one. Claiming a repayment requires timely filing with Revenue Scotland.
4. LBTT Filing and Payment
All notifiable transactions must be reported to Revenue Scotland on an LBTT return and the tax paid within 30 days of the effective date of the transaction. Solicitors usually file on behalf of buyers or tenants, but legal responsibility rests with the taxpayer. Late filing or payment attracts statutory penalties and interest. ADS is also reportable and payable within the same timeframe, with separate procedures for reclaim claims.
Section Summary
LBTT is Scotland’s devolved equivalent of SDLT, designed to raise revenue and reflect housing policy priorities. Its progressive bands, the Additional Dwelling Supplement, and devolved reliefs make it distinct from SDLT. Compliance requires timely 30-day filing and careful consideration of eligibility for reliefs and ADS repayments.
You can read our extensive guide to the LBTT here >>
Section C: Council Tax
Council tax is the principal local tax on domestic properties in England, Scotland, and Wales. It is levied by local authorities to fund services such as waste collection, education, housing, policing, and social care. For most households, council tax is a recurring annual charge, typically collected in monthly instalments, and represents a key element of local government funding.
1. What Council Tax Covers
Council tax is payable on most residential dwellings, whether owned or rented. Liability usually falls on the resident, with a hierarchy of liability rules determining responsibility if multiple people are involved. Revenue is allocated to local authorities, with a proportion directed to police and fire services. Exemptions exist for certain categories of property, such as student halls of residence or dwellings occupied exclusively by full-time students, under-18s, or where occupation is prevented by probate or incapacity.
2. Banding and Valuation
Properties are assigned a valuation band based on their market value at a fixed date:
- England and Scotland: 1 April 1991
- Wales: 1 April 2003
Bands run from A (lowest) to H or I (highest, depending on jurisdiction). Each local authority sets its own annual charge per band, meaning liability varies by both property value and local authority budget decisions. Appeals against banding can be made, though strict criteria and evidence requirements apply.
3. Discounts, Exemptions and Reductions
Council tax is subject to a range of statutory discounts and reductions, including:
- Single person discount of 25% where only one liable adult occupies the property
- Exemptions for certain categories of dwellings or occupiers (e.g., severe mental impairment, full-time students)
- Council Tax Reduction schemes, which provide means-tested support for low-income households
From April 2024, English local authorities gained powers to apply up to 100% council tax premiums on second homes and certain long-term empty properties, with rollouts depending on local decisions. Similar provisions already exist in Wales and Scotland.
4. Collection and Enforcement
Bills are typically issued in March for the new financial year, payable over 10 or 12 instalments. Non-payment can trigger enforcement action: reminders, liability orders, deductions from earnings or benefits, or enforcement by certificated enforcement agents. Local authorities have strong recovery powers, making compliance and timely payment essential.
Section Summary
Council tax links domestic property occupation with the funding of vital local services. Liability is determined by property band and local authority budgets, with discounts and reductions providing relief in defined circumstances. Growing use of premiums on second homes and empty properties means compliance requires awareness of local variations. For households, council tax remains a predictable but significant annual expense.
You can read our extensive guide to Council Tax here >>
Section D: Business Rates
Business rates, also called non-domestic rates, are the main local tax on commercial property in England, Scotland, and Wales. They apply to most non-domestic premises, including shops, offices, factories, warehouses, and some mixed-use properties. Business rates are a significant overhead for businesses and a vital funding source for local government services.
1. What Business Rates Apply To
Business rates are chargeable on most properties not used solely for domestic purposes, including:
- Retail outlets and high street shops
- Offices and professional service premises
- Industrial units and warehouses
- Hospitality venues such as pubs, hotels, and restaurants
Some categories are exempt, such as agricultural land and buildings. Certain businesses benefit from reliefs, depending on the property type, value, and location.
2. Rateable Value and Multipliers
The tax liability is based on the property’s rateable value, determined by the Valuation Office Agency (VOA) in England and Wales or by the Scottish Assessors in Scotland. The rateable value is intended to reflect the property’s open market rental value. Liability is then calculated by multiplying the rateable value by a multiplier (Uniform Business Rate). In England, multipliers are frozen until at least 2026 as part of government measures to support businesses.
Revaluations of all non-domestic properties now occur every three years, following reforms implemented in 2023, to ensure values better reflect current market conditions.
3. Reliefs and Reductions
A variety of reliefs can reduce or eliminate liability in defined cases, including:
- Small Business Rate Relief, reducing liability for properties with lower rateable values
- Charitable Rate Relief, available to registered charities
- Rural Rate Relief for eligible rural businesses
- Transitional Relief, phasing in changes following revaluations
Reliefs are not automatically applied in all cases; businesses often need to apply to their local authority and provide evidence of eligibility.
4. Revaluation and Appeals
Businesses can challenge their rateable value if they believe it is inaccurate. In England, the statutory process is known as Check, Challenge, Appeal. In Scotland and Wales, separate but similar regimes apply. Appeals must follow strict steps and deadlines, with supporting evidence required. Correct handling of revaluations and appeals is vital for businesses seeking to manage liabilities.
Section Summary
Business rates are a major ongoing cost for non-domestic occupiers, directly tied to property values and government-set multipliers. Reliefs can reduce burdens, but businesses must engage with local authorities to secure them. The new three-yearly revaluations, combined with frozen multipliers in England, highlight the evolving landscape of this tax. Proactive management and, where necessary, appeals are essential to ensure liabilities remain fair and accurate.
You can read our extensive guide to Business Rates here >>
FAQs
What is the difference between SDLT, LBTT, and LTT?
Stamp Duty Land Tax (SDLT) applies in England and Northern Ireland, Land and Buildings Transaction Tax (LBTT) applies in Scotland, and Land Transaction Tax (LTT) applies in Wales. All are property transaction taxes, but each has its own devolved rates, thresholds, and reliefs.
How is council tax calculated?
Council tax is based on the valuation band of a property, determined by its assessed market value at a fixed date. Each local authority sets its annual charge for each band, so the amount payable depends on both the banding and the local authority’s budget decisions.
Can small businesses get relief on business rates?
Yes. Small Business Rate Relief reduces or removes liability for qualifying properties with lower rateable values. Other reliefs, such as charitable or rural relief, may also apply. Businesses must normally apply to their local authority to secure these reductions.
Do property buyers pay both SDLT (or LBTT/LTT) and council tax?
Yes, but they are separate taxes. SDLT, LBTT, or LTT is a one-off transaction tax payable when acquiring property. Council tax is an annual local charge on domestic occupation. Purchasers need to budget for both where relevant.
Are there exemptions for empty properties?
Yes. Council tax exemptions may apply to unoccupied properties, such as those left empty due to probate or solely occupied by students. Business rates exemptions also exist for certain vacant non-domestic properties, though these are generally time-limited and depend on property type.
Conclusion
Property and local taxes are an integral part of the UK tax system, applying at both national and local levels. SDLT, LBTT, and LTT represent significant transaction costs when acquiring property, while council tax and business rates are recurring liabilities that fund local services. Each regime is distinct, reflecting devolved policymaking, but all share strict compliance rules, statutory deadlines, and penalties for non-payment.
For individuals, these taxes affect decisions around buying and occupying property. For businesses, they influence location strategy, cost management, and cash flow. Reliefs can ease burdens, but eligibility conditions must be met and evidenced carefully. The devolved nature of property transaction taxes underscores the need to identify which jurisdiction’s rules apply.
This gateway guide has outlined the operation of SDLT, LBTT, council tax, and business rates, with reference to LTT in Wales. More detailed guides should be consulted for each tax. By understanding the key principles and compliance requirements, taxpayers can plan effectively, avoid pitfalls, and ensure they are meeting their obligations.
Glossary
| Term | Definition |
|---|---|
| SDLT | Stamp Duty Land Tax, a property transaction tax payable on land and property purchases in England and Northern Ireland. |
| LBTT | Land and Buildings Transaction Tax, Scotland’s devolved property transaction tax administered by Revenue Scotland. |
| LTT | Land Transaction Tax, Wales’ devolved property transaction tax administered by the Welsh Revenue Authority. |
| Council Tax | A local tax charged on domestic properties, collected by local authorities to fund services such as waste collection, education, and social care. |
| Business Rates | A local tax on non-domestic properties such as shops, offices, warehouses, and factories. |
| Rateable Value | The assessed annual rental value of a property, used to calculate business rates liability. |
| Valuation Band | The property value category assigned to a home for council tax purposes. |
| Additional Dwelling Supplement (ADS) | An additional LBTT charge in Scotland on purchases of second homes or buy-to-let properties, repayable in some cases if a previous main residence is sold within 18 months. |
| Relief | A statutory reduction in tax liability available under specific conditions. |
Useful Links
| Resource | Link |
|---|---|
| GOV.UK – Stamp Duty Land Tax | Visit page |
| Revenue Scotland – LBTT | Visit page |
| Welsh Revenue Authority – Land Transaction Tax | Visit page |
| GOV.UK – Council Tax | Visit page |
| GOV.UK – Business Rates | Visit page |
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services Limited - a Marketing & Content Agency for the Professional Services Sector.
