What is Stamp Duty?
Stamp Duty Land Tax is a tax paid when purchasing property or land in England and Northern Ireland. This guide covers rates, thresholds, surcharges, and filing obligations.
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 — each portion of the purchase price falling within a band is taxed at the rate for that band.
Standard Rates (from April 2025)
| Property Price Band | SDLT Rate |
|---|---|
| Up to £125,000 | 0% |
| £125,001 to £250,000 | 2% |
| £250,001 to £925,000 | 5% |
| £925,001 to £1,500,000 | 10% |
| Over £1,500,000 | 12% |
First-Time Buyer Relief
First-time buyers benefit from higher thresholds:
| Property Price Band | SDLT Rate |
|---|---|
| Up to £300,000 | 0% |
| £300,001 to £500,000 | 5% |
This relief is only available if the purchase price does not exceed £500,000. If it does, the standard rates apply from the first pound.
To qualify, the buyer must never have owned a residential property anywhere in the world.
Higher Rates for Additional Properties
A 3% surcharge applies on top of standard rates when buying an additional residential property (second homes, buy-to-let investments). This applies to the entire purchase price.
| Property Price Band | Rate (including surcharge) |
|---|---|
| Up to £125,000 | 3% |
| £125,001 to £250,000 | 5% |
| £250,001 to £925,000 | 8% |
| £925,001 to £1,500,000 | 13% |
| Over £1,500,000 | 15% |
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 purchases by non-UK residents on top of all other applicable rates. This applies to individuals who have not been present in the UK for at least 183 days in the 12 months before the purchase.
Commercial Property Rates
Different rates apply to purchases of non-residential and mixed-use property:
| Property Price Band | SDLT Rate |
|---|---|
| Up to £150,000 | 0% |
| £150,001 to £250,000 | 2% |
| Over £250,000 | 5% |
Mixed-use properties (those with both residential and non-residential elements) are taxed at the commercial rates, which are generally lower.
Leasehold Purchases
Existing Leases
When buying an existing lease on a residential or commercial property, SDLT is charged on the purchase price at the standard rates above.
New Leases
For new leases, SDLT may be charged on two elements:
- Lease premium: Taxed at the standard rates
- Net present value (NPV) of rent: For residential properties, 1% on the portion of NPV exceeding £250,000. For commercial properties, 1% on NPV above £150,000 and 2% above £5 million
SDLT Calculation Example
A buyer purchasing a house for £400,000 (not a first-time buyer, main residence):
| Band | Taxable Amount | Rate | Tax |
|---|---|---|---|
| £0 – £125,000 | £125,000 | 0% | £0 |
| £125,001 – £250,000 | £125,000 | 2% | £2,500 |
| £250,001 – £400,000 | £150,000 | 5% | £7,500 |
| Total SDLT | £10,000 |
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 Bank of England base rate plus 2.5% |
SDLT and Company Purchases
When a company purchases residential property worth £500,000 or more, a flat rate of 15% applies to the entire purchase price. 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.