Stamp duty on residential property

SDLT (often simply referred to as ‘stamp duty’) is a form of taxation that applies to freehold or leasehold property that is purchased or transferred in exchange for payment. The purchaser or recipient of the property must pay the correct amount of stamp duty to HMRC within 14 days of completing the purchase, and they must submit an SDLT return. Even if no stamp duty payment is due, the SDLT return should usually be submitted. Late returns can incur penalties (see the Government’s guidance for further information).

If you are buying your first home you can claim first-time buyer relief on stamp duty land tax. You will qualify for this tax relief if you are:

• buying your first home (a residential property), and any other people you are buying with are also buying their first home)

• purchasing the property for £500,000 or less, and 

• purchasing the property after 21 July 2021 or before 8 July 2020 (between these dates there were alternate provisions in place due to the effects of the Coronavirus (COVID-19) pandemic 

You don't have to pay any tax if the house price is up to £425,000 and you only need to pay 5% on the portion from £425,001 to £625,000. If your new house price is over £625,000 the standard rules apply (see below).

The current SDLT base threshold is £250,000 for residential property. Property that is purchased for less than this price (or which is worth less than this amount if it is being transferred in a manner other than outright purchase, for example when two people marry) is not liable for SDLT. As of 23 September 2022, the SDLT rates are as follows:

• any portion of the price/value up to £250,000 = 0%

• any portion of the price/value between £250,001 and £925,000 = 5%

• any portion of the price/value between £925,001and £1.5 million = 10%

• any portion of the price/value above £1.5 million = 12%

You usually must pay an additional 3% of the price/value in SDLT if you purchase a residential property whilst you already currently own another residential property. This additional 3% usually does not apply if you are buying a residential property to replace your current main residence.

These rates apply both to sales and transfers of freehold property and to purchases of a  lease (called the ‘lease premium’) of a leasehold property.

Example: Frank buys a house for £350,000. It is the only residential property he owns, but he has owned another residential property in the past. He pays no SDLT on the first £250,000. He pays 5% of the next £100,000 = £5,000. As the property price is not more than £925,000, Frank must only pay £5,000.

See the Government website for up-to-date SDLT rates, information on special rates of SDLT and to access the SDLT calculator.

If you buy a new main residence but there’s a delay in selling your previous main residence, you’ll have to pay the higher stamp duty rates (ie including the additional 3%, described above) as you’ll own two properties.

If you sell or give away your previous main residence within 3 years of buying your new residence, you can apply for a refund of the higher SDLT rate you paid.

In this situation, you must apply for any repayment within 12 months of the sale of your old main residence.

From 1 April 2021, a 2% SDLT surcharge applies when non-UK residents buy property (regardless of whether they already own property).

This surcharge applies to almost all SDLT payments and is separate from the 3% SDLT surcharge that applies to second homes and additional residential property purchases. This means that the top SDLT rates will increase to a maximum of 17% for some non-UK resident buyers.

For the purposes of SDLT, a non-UK resident is someone who is not present in the UK for at least 183 days (ie 6 months) during the 12 months before the property purchase.

See the Government’s guidance for more information on this SDLT surcharge and when it applies, and to access the SDLT calculator.

There is generally no stamp duty to pay in respect of inherited property that has been left in a will.

Property which is transferred as a gift (during someone’s life) is liable for stamp duty if there is an outstanding mortgage; SDLT will be applied to the value of the remaining mortgage.

For stamp duty liability on other types of property transfer, see the Government’s guidance.

When purchasing a shared ownership property (eg with a housing association or local housing authority), there are two options available for paying SDLT:

1. market value election - stamp duty is paid based on the total value of the property, which covers any future additional equity share purchased

2. staged payment - this involves an initial SDLT payment on the ‘lease premium’ (the amount you paid for the lease) if it falls above the threshold (ie £250,000 - see the standard rates set out above). There is an additional 1% SDLT payment if the total rent over the life of the lease (called the 'net present value') is over £250,000

For more information on stamp duty and shared ownership, see the Government’s guidance.

Normally, even if SDLT does not need to be paid because the price of a property falls below the threshold, an SDLT return must be filed. However, there are certain situations in which SDLT doesn’t need to be paid and a return doesn’t need to be filed, including:

• a freehold property is purchased for less than £40,000

• property is transferred due to divorce or dissolution of a civil partnership

• property is left in a Will

• no money or payment changes hands (ie the property is a gift)

For further information on SDLT exemptions and reliefs, see the Government’s guidance or Ask a lawyer.