Stamp Duty Explained
Stamp Duty Land Tax (SDLT) is a tax paid by the buyer when purchasing property or land in England and Northern Ireland above certain price thresholds. Scotland has the Land and Buildings Transaction Tax (LBTT) and Wales has the Land Transaction Tax (LTT), which are separate taxes with different rates.
SDLT is governed by the Finance Act 2003 and administered by HMRC. The tax applies to both freehold and leasehold purchases, whether the property is bought outright or with a mortgage.
Residential Property Rates
SDLT is charged on a slice basis, like income tax: each portion of the purchase price that falls within a band is taxed at the rate for that band, and the first slice is taxed at 0%.
The bands and rates are set by Parliament and have changed several times; for example, temporary higher nil-rate thresholds ended on 31 March 2025. Because they change, check the current residential and non-residential tables on GOV.UK’s Stamp Duty Land Tax rates page or use HMRC’s calculator before relying on a figure.
First-Time Buyer Relief
First-time buyers buying their main home pay no SDLT on a first slice of the price and a reduced rate on the next slice, up to a maximum price. If the price is above that maximum, the relief is lost entirely and the standard rates apply.
To qualify, every buyer must be buying their main residence and must never have owned a residential property anywhere in the world.
Higher Rates for Additional Properties
A surcharge applies on top of the standard rates when an individual buys an additional residential property, such as a second home or a buy-to-let investment. It is charged on every slice of the price, including the slice that would otherwise be taxed at 0%.
The surcharge does not apply if you are replacing your main residence, provided the previous home is sold within 3 years.
Non-UK Resident Surcharge
A further 2% surcharge applies to residential purchases by non-UK residents on top of all other applicable rates. Individuals are generally treated as non-resident if they have not been present in the UK for at least 183 days in the 12 months before the purchase.
Commercial Property Rates
Non-residential and mixed-use property has its own, lower set of bands and rates, also charged on a slice basis. There is no surcharge for additional properties on commercial purchases.
Mixed-use properties (those with both residential and non-residential elements) are taxed at the non-residential rates.
Leasehold Purchases
Existing Leases
When buying an existing lease, SDLT is charged on the purchase price at the rates for that type of property.
New Leases
For new leases, SDLT may be charged on two elements:
- Lease premium: taxed at the normal rates for the type of property
- Net present value (NPV) of rent: taxed at its own rates once the NPV exceeds a threshold, which differs for residential and non-residential leases
SDLT Calculation Example
The slice method works the same whatever the current bands are. Using purely illustrative bands of 0% up to £A, 2% from £A to £B and 5% above £B, a buyer paying a price above £B for a main residence pays:
| Slice of the price | Rate | Tax |
|---|---|---|
| Up to £A | 0% | £0 |
| From £A to £B | 2% | 2% of (£B − £A) |
| Above £B | 5% | 5% of (price − £B) |
| Total SDLT | Sum of the slices |
Replace £A, £B and the rates with the current figures from GOV.UK to get the actual liability.
Exemptions and Reliefs
Several transactions are exempt from SDLT or qualify for relief:
- Transfers on death — no SDLT on property passing under a will or intestacy
- Transfers between spouses or civil partners as part of a divorce or dissolution
- Gifts with no consideration (though the additional property surcharge can still apply if relevant)
- Charities purchasing property for charitable purposes (100% relief)
- Multiple Dwellings Relief — was available for purchases of multiple dwellings in a single transaction but was abolished from June 2024
- Compulsory purchase orders
- Right to Buy transactions under local authority schemes
Filing and Payment
Deadline
An SDLT return must be filed and the tax paid within 14 days of completion (the date legal ownership transfers). This deadline is strict — penalties and interest apply for late filing or payment.
How to File
- Solicitors or conveyancers usually handle the SDLT return on behalf of the buyer as part of the conveyancing process
- Returns are submitted to HMRC online
- HMRC issues an SDLT5 certificate upon receipt, which is needed to register the property with HM Land Registry
Penalties
| Offence | Penalty |
|---|---|
| Return filed up to 3 months late | £100 |
| Return filed 3 to 12 months late | £200 |
| Return filed more than 12 months late | Tax-related penalty up to 100% of tax due |
| Incorrect return | Penalty based on behaviour (careless, deliberate, concealed) |
| Late payment | Interest at a rate linked to the Bank of England base rate |
SDLT and Company Purchases
When a company buys a residential dwelling for more than £500,000, a higher flat rate can apply to the entire purchase price instead of the slice rates. This is designed to discourage the use of corporate envelopes to avoid SDLT and was introduced alongside the Annual Tax on Enveloped Dwellings (ATED).
Certain reliefs are available for property developers, rental businesses, and other qualifying uses.
Stamp Duty on Shares
Separate from SDLT, Stamp Duty and Stamp Duty Reserve Tax (SDRT) apply to purchases of shares:
- 0.5% of the consideration paid, rounded up to the nearest £5 for Stamp Duty
- No tax on purchases of £1,000 or less
- SDRT is collected automatically on electronic share transactions
- Physical share transfers require stamping and payment to HMRC
Interaction with Other Taxes
The SDLT paid on acquiring a property forms part of the cost base for Capital Gains Tax purposes when the property is eventually sold. For businesses, stamp duty on commercial property can be an allowable cost for corporation tax calculations.
Property transactions may also have VAT implications. When a property is sold with VAT, the SDLT is calculated on the VAT-inclusive price, increasing the total tax cost.
Maintaining accurate financial records of property transactions, including all purchase costs and SDLT paid, is essential for future tax calculations.