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Tax on buying property

If you buy a property in the UK over a certain purchase price you have to pay Stamp Duty Land Tax (SDLT). This is charged on all purchases of houses, flats and other land and buildings.

What is Stamp Duty Land Tax?

SDLT replaced Stamp Duty in December 2003 and is a tax on the purchase price of land and buildings. When you buy a property you may have to pay SDLT.

Paying SDLT

If you buy either a freehold or a leasehold property and the purchase price is more than £125,000, you pay SDLT of between one and five per cent of the whole purchase price. See the table below for more detail.

If the purchase price is £125,000 or less you don't pay any SDLT.

First-time buyers

If you are a first-time buyer the threshold for when you start to pay SDLT is £250,000. This is only if you have never owned a house or flat in the UK or anywhere else in the world. If you are buying with someone else they must never have owned property before either. This higher threshold applies to purchases made on or after 25 March 2010 and before 25 March 2012.

Purchase price of residential property Rate of SDLT (percentage of the total purchase price) Rate of SDLT - first-time buyers (percentage of the total purchase price)
£0 - £125,000 0% 0%
£125,001 - £250,000 1% 0%
£250,001 - £500,000 3% 3%
£500,001 - £1 million 4% 4%
£1 million or more 5% 5%

You can check current rates of SDLT on the HM Revenue and Customs (HMRC) website.

SDLT Disadvantaged Areas Relief

If you buy property in an area designated by the government as 'disadvantaged' you may qualify for Disadvantaged Areas Relief. In this case the threshold for SDLT is £150,000. If you are a first-time buyer you don't need to apply as the threshold for first-time buyers is higher.

You can check the HMRC website to see if the property you are buying is in an area designated as disadvantaged. (You'll need to scroll down to use the postcode search tool.)

Zero-carbon homes  

There is a relief from SDLT for zero-carbon homes. All qualifying houses under £500,000 are exempt and houses bought for £500,000 or above will have their SDLT bill reduced by £15,000.

What counts as zero-carbon?

A zero-carbon home can be connected to mains electricity and gas but needs to have sufficient additional renewable power to cover the average consumption of a house over a year.

In order to achieve this, the fabric of the building has to be insulated and built to very high standards and the house needs to incorporate renewable energy technologies.

The house must be 'zero-carbon' over the course of the year.

Paperwork

As the buyer of the property, you are responsible for completing the land transaction return and paying the SDLT.

However, in practice, your solicitor or licensed conveyancer will usually handle this for you and send it to HMRC on your behalf.

You should check that all the information on the form is correct and complete before signing the declaration.

More useful links

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