Stamp Duty Land Tax (SDLT) is charged in slices, much like income tax, and the bill depends on the price, on whether the buyer owns other property and on whether relief applies. This guide sets out the rules as published on GOV.UK and shows what they mean in pounds at typical London prices.
What is Stamp Duty Land Tax and who pays it?
According to GOV.UK, SDLT is a tax on buying property or land above a set threshold in England and Northern Ireland. Scotland and Wales have their own taxes. The buyer pays it, whether they are acquiring a freehold, a new or existing leasehold, or a shared ownership home. It can also apply where property is received in exchange for payment, such as taking on a mortgage or buying a share in a house.
The residential threshold is £125,000, the first-time buyer threshold is £300,000 (for homes costing up to £500,000), and the non-residential threshold is £150,000. The return and payment are due to HMRC within 14 days of completion. Solicitors or conveyancers usually file and pay on completion day, and late filing or payment can lead to penalties and interest.
How do the standard residential bands work?
SDLT is a marginal tax. Each rate applies only to the slice of the price that falls inside its band, not to the whole price. For a buyer who will own only one home after the purchase, GOV.UK lists these rates:
| Portion of the price | Rate |
|---|---|
| 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% |
Because most London homes sell well above £250,000, the 5% band does most of the work. That band covers a very wide range of prices, which is why the tax rises smoothly for most buyers rather than in sudden steps.
A worked example at £550,000
Illustrative arithmetic for a £550,000 purchase by someone who will own just that one home:
- First £125,000 at 0%: £0
- Next £125,000 at 2%: £2,500
- Remaining £300,000 (£550,000 less £250,000) at 5%: £15,000
The total is £17,500, or about 3.2% of the price. The figure of £550,000 is chosen for illustration; it sits close to the average London price discussed in our look at eleven months of London house price falls.
Does first-time buyer relief apply to every purchase?
No. First-time buyer relief, according to GOV.UK, charges 0% on the portion up to £300,000 and 5% on the portion from £300,001 to £500,000. It is not available if the price is above £500,000. That cut-off matters in London, where many first homes cost more than that.
Worked examples show the effect:
- £450,000 purchase. With relief: 5% of £150,000 is £7,500. Without relief, the standard bands give £2,500 plus 5% of £200,000 (£10,000), or £12,500. The relief is worth £5,000.
- £500,000 purchase. With relief: 5% of £200,000 is £10,000. Standard bands: £2,500 plus 5% of £250,000 (£12,500), or £15,000. Again £5,000 is saved.
- £550,000 purchase. No relief is available, so the bill is the standard £17,500 shown above.
The threshold therefore behaves as a cliff edge. A first-time buyer at £500,000 pays £10,000, while the same buyer at £500,001 would pay roughly £15,000. The additional tax of about £5,000 is a strong reason to understand the rule before agreeing a price, though it is not a reason to buy at any particular price.
What are the higher rates for additional homes?
GOV.UK describes a set of higher rates that apply when buying a residential property would leave the buyer owning more than one. From 1 April 2025 these are 5%, 7%, 10%, 15% and 17% across the bands. Each is the standard rate plus 5 percentage points, so the extra is a flat 5% of the whole price once the £40,000 minimum is met.
The higher rates apply where the property costs £40,000 or more, will not be the buyer’s only residential property worth £40,000 or more anywhere in the world, the buyer has not sold or given away their previous main home, and nobody else holds a lease on it with more than 21 years left.
Illustrative arithmetic for a second property at £550,000
The standard tax is £17,500. The 5% higher-rate addition is £27,500 (5% of £550,000). The total is £45,000, or about 8.2% of the price. That is more than two and a half times the single-home bill.
When can the higher rates be avoided or refunded?
Someone replacing their main residence is not caught by the higher rates if they will use the new property as their main home and sold or gave away the previous one before or on the same day as the purchase. Transfers to a spouse are generally exempt where no one else is involved.
Where a buyer buys first and sells later, the higher rates are charged at purchase but can be reclaimed. GOV.UK says that if the previous main home is sold or given away within three years of buying the new one, the higher-rate part can be claimed back, unless the buyer or their spouse still owns part of the old home. For sales on or after 29 October 2018, the claim must be made within 12 months of the later of the sale or the filing date of the new property’s return. There is also scope to apply for a refund in exceptional circumstances, such as government restrictions, where a sale could not be completed within three years.
How much extra do non-UK residents pay?
GOV.UK states that a 2% surcharge applies to residential property bought in England or Northern Ireland by non-UK residents, in force since 1 April 2021. It sits on top of the other residential rates, including the higher rates. Some buyers and transactions are exempt, and refunds may be available.
On a £1 million purchase, 2% adds £20,000 to whatever the other rules produce. That makes residence status and ownership structure significant for international buyers, a group whose behaviour is part of the story in prime London property beyond the traditional postcodes.
What does SDLT cost at different London price points?
Putting the standard and higher rates side by side shows how quickly the bill climbs. These are illustrative figures worked from the published bands, for a buyer without relief:
| Price | Single home | Additional home (higher rates) |
|---|---|---|
| £300,000 | £5,000 | £20,000 |
| £550,000 | £17,500 | £45,000 |
| £1,000,000 | £43,750 | £93,750 |
| £2,000,000 | £153,750 | £253,750 |
Checking the £1 million line: £2,500 at 2%, then 5% of £675,000 (£33,750) for the £250,000 to £925,000 slice, then 10% of £75,000 (£7,500), which totals £43,750. The additional-home figure adds 5% of £1 million, or £50,000. At £2 million the top slice is 12% of £500,000, or £60,000, added to £2,500, £33,750 and 10% of £575,000 (£57,500), giving £153,750; the extra £100,000 takes the higher-rate total to £253,750.
At the top end, SDLT is only one of the taxes a purchase can attract. Owners of very valuable homes should also be aware of the surcharge described in what owners should know about the high-value council tax surcharge. Some households weigh these costs and choose a different route altogether, as discussed in why wealthy buyers are renting instead of owning.
Why the rules deserve a check before every purchase
SDLT thresholds and rates have been changed several times in recent years, and the published rates on GOV.UK are the reference point at the date of completion rather than the date of an offer. The figures above reflect the GOV.UK guidance as of 27 October 2026. A conveyancer will calculate the exact liability, including the effect of any relief, the treatment of linked transactions and the position of anyone buying with a partner who already owns property.
The broad lessons are straightforward. SDLT is marginal, so the headline rate is not the average rate. First-time buyer relief ends abruptly at £500,000. The higher rates add 5 percentage points to each band and can be reclaimed in the right circumstances. And the cost is due within 14 days of completion, so it belongs in the budget alongside the deposit rather than as an afterthought.
This article provides general information, not personalised financial advice. Rules, rates and thresholds change.
Sources: GOV.UK
