Stamp Duty Land Tax (SDLT) Guide for London Homebuyers

What is SDLT?

Stamp Duty Land Tax is a government tax applicable to the ownership of a residential property or land in the UK. Stamp Duty applies to both freehold and leasehold homes and is payable whether you buy using cash or a mortgage. SDLT can seem like a complex tax or process to some; however, once the concept is cleared, each portion of the purchase price is taxed at a different rate.

How SDLT works

Current limits allow buyers to purchase up to £250,000 without paying stamp duty. Above this price point, only the portion of the price exceeding £250,000 attracts tax. This layered system applies to all standard purchases unless a surcharge or relief is triggered. If you are buying property in London, know that most purchases are above the £250,000 threshold, so factor in this expense at the budgeting stage.

Relief for first-time buyers

First-time buyers benefit from generous allowances that are designed to ease entry into the UK’s housing market. Under the current rules, no SDLT is payable on a £425,000 purchase. The difference between £425,001 and up to £625,000 is taxed at 5%. Purchases above £625,000 are liable to pay the standard stamp duty rates.

Buying a second home or property

If you are purchasing a second home or BTL property, the standard SDLT rate plus a 3% surcharge is applied across the full price. This surcharge also applies if you are buying a new main home before selling the old one; however, you can claim this amount back if the original property is sold within three years. As an investor, you must understand how the surcharge affects the total acquisition cost.

Non-resident SDLT surcharge

Overseas property buyers who don’t meet the UK residence test within the 12 months preceding completion may be subject to an additional 2% surcharge. This test is based on physical presence in the UK rather than tax residency or nationality. This bracket of tax is charged on both main homes and investment purchases. Plus, it is added on top of any standard rates and the 3% additional property surcharge.

Filing & paying SDLT correctly

Buyers must submit an SDLT return and pay any tax due within 14 days of completion. While your solicitor will handle the returns, ultimately, the legal responsibility is yours. Even if SDLT does not apply to your purchase, remember to file an SDLT return unless the transaction is marked exempt. Fining late may result in penalties and, in some cases, can also delay registration of the new title with the Land Registry.

Where is SDLT not applicable?

The SLDT is non-applicable if the property is inherited through a will, even where an outstanding mortgage exists. The same is for transfers ordered by the court during divorce, civil partnership dissolution or legal separation. Gifts, where no money changes hands or a mortgage is assumed, are also not subject to SDLT.

Transferring ownership or equity

SDLT is valid in cases where ownership shares changed, even without an outright purchase. Whether you are adding or removing a partner, transferring a share to a family member or restructuring ownership for financial planning, you will need to pay the stamp duty. Remember that the tax is calculated on the chargeable consideration, which means only on any cash exchanged, share of an outstanding mortgage taken on or other obligations.

Mixed-use purchases & linked transactions

Some transactions fall outside standard residential rules and require separate attention. Mixed-use properties, which combine residential and commercial elements, are taxed at commercial Stamp Duty Land Tax rates. These properties are not subject to the 3% additional property surcharge. Company purchases follow the same SDLT banding as individuals and overseas companies may also need to pay the 2% non-resident surcharge. SDLT is also calculated on linked transactions, i.e. multiple related purchases occur between the same parties and on shared ownership purchases and later staircasing.

How much SDLT do I need to pay?

Property price	SDLT rate
£0 - £250,000	0%
£250,001 - £925,000	5%
£925,001 - £1.5 million	10%
Over £1.5 million	12%

How Benham & Reeves supports Indian investors with SDLT

Benham & Reeves has been a leading force in the London property market since the 1950s. Our India operations were established in 2011 and since then, our teams (Delhi & Mumbai) have played a major role in guiding Indian investors through the UK property taxes, including SDLT. With one-on-one consultations, our agents ensure you understand SDLT liabilities before committing to a property.

We liaise closely with UK solicitors, financial planners and mortgage advisers to keep you abreast with the applicable SDLT rates, surcharges or reliefs. If you’re looking for a rental investment in London, we can also assist you with long-term rental and management services through our 21 London branches.

Frequently asked questions

Almost all residential purchases require this tax to be paid. SDLT applies where you opt to pay in cash or mortgage; it also covers freehold as well as leasehold homes. Exemptions include inheritance, certain court-ordered transfers or gifts with no consideration.

The first £250,000 of the purchase price is currently tax-free. Anything above that is taxed in layers. For instance, if your home costs £600,000, only the amount above £250,000 is taxed. This bracket of tax is not a flat percentage on the full price.

If you are buying an additional property, even if it is a buy-to-let, a 3% surcharge is added on top of the standard rates. This applies across the complete purchase price. If you buy a new home before selling the old one, you will still need to pay the surcharge however can casually request a refund if the original home is sold within the first three years.

Not automatically. This depends on whether you pass the UK residence test during the 12 months before completion. This test is based on days physically spent in the UK, not on passport, nationality or tax residency.

Yes, if you are a first-time buyer purchasing up to £425,000, there is no SDLT to pay. Between £425,001 and £625,000, you only pay 5% on the above £425,000 and beyond £625,000, standard SDLT rates apply.

Stamp Duty Land Tax (SDLT): A guide for London property investors