Buying a Property and Stamp Duty Land Tax

Stamp Duty Land Tax (SDLT) is the tax payable when you buy a property or piece of land. The amount you pay depends on the value of the property, and whether you are an individual, a company or an investor.

Buying a property as an individual

Currently in England, if you and any other joint owners are first-time buyers and your property purchase is under £500,000, you do not pay any SDLT. Otherwise, SDLT is payable on residential properties over £125,000.

There are different bands of SDLT. The amount you pay depends on the purchase price, whether it is a freehold or leasehold, and whether you own any additional properties.

If you are buying a residential freehold property and you own no other properties, you pay –

  • Nothing on the first £125,000
  • 2% on the portion between £125,000 to £250,000
  • 5% on the portion between £250,001 to £925,000
  • 10% on the portion between £925,001 to £1.5 million
  • 12% on anything above £1.5 million

So, if you buy a property for £250,000, you pay nothing on the first £125,000 and 2% on the second £125,000. If you buy a property for £300,000, you pay nothing on the first £125,000, 2% on the second £125,000 and 5% on the remaining £50,000.

The rules for leasehold properties are much the same. However, if you are buying a new residential leasehold property, there may be additional SDLT if the net present value is more than £125,000.
If you already own a property, an extra 3% is added to the SDLT bands listed above.

The thresholds are different for non-residential and mixed-use property, such as commercial property and agricultural land. The first £150,000 is tax-free. This is outlined in greater detail below.

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Buying a property as a company

If you are buying a property as a corporate entity, also known as ‘non-natural person’, the amount of SDLT depends on whether you are buying a residential property or a non-residential/mixed-use property.

For companies buying residential properties worth more than £500,000, the rate of SDLT is 15%. There are no bands. However, there are some exceptions to this rule. This includes farmhouses and properties that are to be occupied by employees.

For companies (or individuals) buying non-residential or mixed-use property, the rate of SDLT is lower. You pay –

  • Nothing on the first £150,000
  • 2% on the portion between £150,001 to £250,000
  • 5% on anything above £250,000

Buying a property as an investor

If you are buying a property as an investor, then it is very likely that you already own at least one property. If so, you will be subject to the 3% surcharge. This mean you will pay –

  • 3% the first £125,000 (unless the purchase price is below £40,000)
  • 5% on the portion between £125,000 to £250,000
  • 8% on the portion between £250,001 to £925,000
  • 13% on the portion between £925,001 to £1.5 million
  • 15% on anything above £1.5 million

If you do not already own a property, SDLT is calculated as though you were buying a residential property. However, you may not be eligible to certain reliefs as a buy-to-let investor, such as the first-time buyer relief.

You need to factor in the costs of Stamp Duty Land Tax when buying a property. We can help you understand how much you will be liable to pay.

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