Stamp Duty Land Tax Rates and Reliefs Explained
In this article, we take a look at Stamp Duty Land Tax (SDLT). While this article is particularly relevant to the CII CF6 and R07 exams, SDLT also appears in CF1, R02, R03, R06, AF1, ER1 and LP2.
This article is specific to the SDLT rates in place from 1 April 2025 and is correct as at 28 February 2025.
Stamp Duty Land Tax
Stamp Duty Land Tax (SDLT) is a key consideration for anyone purchasing property in England and Northern Ireland. It is a tax levied on property purchases above a certain value.
The amount of SDLT payable depends on the property’s purchase price and the buyer’s circumstances. It follows a tiered structure, where different portions of the price are taxed at increasing rates. Instead of a flat rate on the entire amount, SDLT is only applied to the portion of the price that falls within each tax band.
SDLT Rates for Most Residential Buyers
From 1 April 2025, the SDLT rates structure reverts to its pre-September 2022 thresholds, i.e.,:
- Up to £125,000: 0%
- £125,001 to £250,000: 2%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Above £1.5 million: 12%
Example
Kim and Sam are home movers and are buying a property in July 2025 with a value of £500,000.
They will pay 0% (£0) on the first £125,000 (£0), then 2% (£2,500) on the next £125,000 with 5% (£12,500) on the portion between £250,000 and £500,000.
£15,000 SDLT is therefore due and must be paid within 14 days of completing the property purchase. The solicitor or conveyancer will usually handle the payment as part of their work, ensuring it is paid on time.
SDLT Rates for First-Time Residential Buyers
To encourage home ownership, first-time buyers benefit from reduced rates of SDLT. From 1 April 2025, the relief thresholds for first-time buyers becomes:
- No SDLT: Up to £300,000
- 5% on the portion from £300,001 to £500,000:
NB If the property price exceeds £500,000, standard rates apply without relief.
Example
Kaleb is a first-time buyer and purchases a property for £500,000 in June 2025. He will pay 0% (£0) on the first £300,000 and 5% (£10,000) on the portion between £300,000 and £500,000.
This is a saving of £5,000 when we compare it to the amount payable by Kim and Sam who were not first-time buyers.
Additional Properties
Individuals buying additional properties valued at over £40,000, such as a second home or a buy-to-let investment, are subject to higher SDLT rates. A 5% surcharge applies to the standard SDLT rates.
Example
Tara purchases a buy-to-let property for £250,000 in June 2025. From 1 April 2025, the charge will be 5% on the first £125,000, with the next £125,000 charged at 7%.
Replacing a Main Residence
If someone sells their main residence and buys another one then it’s a straightforward case of paying the normal rates of SDLT on the new property purchase.
Even if someone owns a buy-to-let property and they have sold their main residence to buy another main home, then the normal rates of SDLT will still apply on the new property purchase. This is because the main residence has been replaced, so the higher rates do not apply.
If a main residence is being replaced but the previous one has not been sold yet, the higher SDLT rates will be charged as in this scenario an additional residential property will be owned. However, if the previous residence is sold within three years a refund of the surcharge can be claimed.
In summary, SDLT is a crucial element of the UK property market, but it can be a complex tax to navigate with the cost significantly adding to the overall expense of buying a property, especially in high-value areas.
Understanding the different scenarios in which SDLT is payable is crucial for exam success.
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