Stamp Duty Land Tax (SDLT) is charged on slices of a purchase price rather than on the whole amount, which surprises many buyers. This article explains how the bands work in England and Northern Ireland, how first-time buyer relief and the higher rates for additional homes change the sum, and what the arithmetic looks like in practice.
What is Stamp Duty Land Tax, and who pays it?
SDLT is a tax paid by the buyer when acquiring land or property above certain price thresholds. According to HMRC guidance on GOV.UK, it applies to freehold purchases, new and existing leaseholds, shared ownership schemes and property transferred in exchange for payment, such as taking on a mortgage.
It applies only in England and Northern Ireland. Scotland has its own Land and Buildings Transaction Tax, and Wales has Land Transaction Tax, so a buyer north of the border or in Wales faces different bands entirely.
In most purchases the solicitor or conveyancer files the return and pays the tax on completion day, then adds the amount to their bill. That makes SDLT feel like part of the legal fees, but it is a separate tax. The wider list of costs that sit around a purchase is covered in the real costs of buying a UK home.
How do the standard residential bands work?
The standard rates apply when someone buys a single residential property and no relief or surcharge applies. As set out on GOV.UK, and as in force from 1 April 2025, they are:
| 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% |
The crucial point is that each rate applies only to the slice of the price that falls inside its band. Crossing a threshold does not raise the rate on everything below it. GOV.UK lists £125,000 as the point where residential SDLT starts to apply.
What does a worked example look like?
Take an illustrative purchase of a home at £400,000 with no reliefs or surcharges. The arithmetic runs as follows:
- The first £125,000 is taxed at 0%, giving £0.
- The next £125,000 (from £125,001 to £250,000) is taxed at 2%, giving £2,500.
- The remaining £150,000 (from £250,001 to £400,000) is taxed at 5%, giving £7,500.
The total is £2,500 plus £7,500, or £10,000. That is an effective rate of 2.5% of the price, well below the 5% top rate that touches only the final slice.
For a £600,000 purchase on the same basis, the 5% slice is £350,000, which gives £17,500, plus the £2,500 from the 2% band, for a total of £20,000. These are illustrations of the method, not quotes, and an actual bill depends on the facts of each transaction.
Who qualifies for first-time buyer relief?
First-time buyers of a residential property get a more generous structure. According to GOV.UK, the relief works like this:
- 0% on the portion up to £300,000
- 5% on the portion from £300,001 to £500,000
- No relief at all if the price is over £500,000
Applying that to the same £400,000 home, the first £300,000 costs nothing and the remaining £100,000 is taxed at 5%, giving £5,000. That is half the £10,000 a standard buyer would pay.
What happens just above the £500,000 limit?
The relief is an all-or-nothing test on the price. A first-time buyer paying £500,000 or less can use it. One paying more must use the standard bands from the first pound. At £600,000, the first-time buyer’s bill is the same £20,000 as any other buyer’s. Anyone buying near the limit therefore faces a sharp change in treatment, which is worth understanding before a price is agreed.
Why do additional properties cost more?
Buyers who will own more than one residential property pay higher rates. GOV.UK says the higher rates apply when all three of the following are true:
- At the end of the purchase day, the buyer will own, or part own, another residential property worth £40,000 or more, anywhere in the world.
- The buyer has not sold or given away their previous main home.
- No one else holds a lease on the property with more than 21 years left to run.
From 1 April 2025, the higher rates add 5 percentage points to each band, which GOV.UK sets out as follows:
| Portion of the price | Higher rate |
|---|---|
| Up to £125,000 | 5% |
| £125,001 to £250,000 | 7% |
| £250,001 to £925,000 | 10% |
| £925,001 to £1.5 million | 15% |
| Above £1.5 million | 17% |
On an illustrative £400,000 purchase, the slices come to £6,250 (5% of £125,000), £8,750 (7% of £125,000) and £15,000 (10% of £150,000). The total is £30,000. As a cross-check, the standard £10,000 plus 5% of the whole £400,000 price (£20,000) also gives £30,000.
Is there a way to get the extra tax back?
Someone replacing their main home may pay the higher rates at first, simply because the old home is still owned on completion day. GOV.UK says that if the previous main home is sold or given away within three years of buying the new one, the buyer can apply for a refund of the higher-rate part of the tax.
The refund is not available if the buyer or their spouse still owns part of the old home, or if the higher rates apply for another reason. GOV.UK also describes a route for refunds after three years in exceptional circumstances, such as government restrictions or action by a public authority that prevented the sale. For anyone selling an investment or second home, the separate tax consequences are explained in the guide to capital gains tax when selling UK property.
What other surcharges and deadlines apply?
Two further points matter for the final figure and for timing:
- Non-UK resident surcharge: According to GOV.UK, a 2% surcharge applies to residential purchases in England or Northern Ireland by buyers who were not present in the UK for at least 183 days in the 12 months before purchase, subject to exemptions. It stacks with other rates, including the higher rates for additional properties.
- Filing and payment: GOV.UK says the return must be filed and the tax paid within 14 days of completion. Penalties and interest can be charged for missing that window.
New leaseholds also carry a twist. If the net present value of the rent over the lease exceeds £125,000, GOV.UK says 1% applies to the portion above that figure, on top of the tax on the lease premium.
Why does stamp duty matter for affordability planning?
SDLT is usually paid in cash on completion, so it needs to be funded alongside the deposit rather than borrowed within the mortgage in the ordinary course. For a buyer with a fixed pot of savings, a £10,000 bill and a £30,000 bill lead to very different deposits. The tax therefore interacts with borrowing costs, covered in the explainer on how mortgage rates affect affordability.
It also shapes the wider question of timing and tenure. Those weighing a purchase against continuing to rent can find the broader economics in renting or buying: comparing the economics. Thresholds and rates have changed several times in recent years, according to the GOV.UK history for the relevant guidance, so the figures here should be checked against the current official page before any decision.
A sliced tax with sharp edges
The core logic of SDLT is simple: each band taxes only its own slice, first-time buyer relief lowers the bill up to a £500,000 price, and additional properties attract five extra percentage points on every band. The edges are where care is needed, notably the £500,000 cut-off for relief and the three conditions that trigger the higher rates. Working through the bands by hand, as in the examples above, is the surest way to see how a price translates into a tax bill.
This article provides general information, not personalised financial advice. Tax rules, thresholds and rates change, so check the current position before acting.
Sources: HM Revenue and Customs; GOV.UK
