Taxes When Buying a Property in the UK: A Complete Guide for Different Buyers
Buying a property in the UK is an exciting milestone, whether it’s your very first home, a move up the ladder, or an investment purchase. But beyond deposits, mortgage deals, and moving vans, there’s one unavoidable cost that catches many buyers off guard: taxes.
The main property tax you’ll pay when buying in England and Northern Ireland is Stamp Duty Land Tax (SDLT). In Scotland, it’s known as Land and Buildings Transaction Tax (LBTT), and in Wales, Land Transaction Tax (LTT). While the names differ, the principles are broadly similar—buyers pay a tax based on the purchase price and type of property.
This guide focuses on SDLT, breaking down how much tax each type of buyer can expect to pay, with examples for first-time buyers, home movers, landlords, overseas buyers, and even companies.
Why Stamp Duty Matters
Stamp Duty is often one of the biggest “hidden costs” of buying a home. It can run into the tens of thousands of pounds and must be paid within 14 days of completion. Failing to budget for it properly can throw a purchase into chaos.
Because SDLT rates vary based on who you are and what you’re buying, it’s essential to understand your position before making an offer.
1. First-Time Buyers
Buying your first home is already expensive, but thankfully, the government offers tax relief to help.
No SDLT is due on the first £300,000 of a property (as long as the property price is £625,000 or less).
From £300,001 to £500,000, you’ll pay 5% on that portion.
If the home costs more than £500,000, the relief disappears, and you pay standard residential rates.
Examples:
- Purchase price £300,000 → £0 SDLT
- Purchase price £500,000 → 5%
Why this matters: First-time buyers are in the most favourable position tax-wise, but crossing the £300,000 threshold can lead to a big jump in liability.
2. Home Movers (Standard Buyers)
If you already own a home and are moving to another, you won’t get the first-time buyer relief. Instead, you’ll pay the standard residential SDLT rates:
- 0% on the first £250,000
- 5% on £250,001 to £925,000
- 10% on £925,001 to £1.5m
- 12% on anything above £1.5m
Example:
Buying a home for £600,000 →
- 0% on first £250,000 = £0
- 5% on next £350,000 = £17,500
Total SDLT = £17,500
Tip for movers: If you are selling your current property at the same time, you avoid the additional 3% surcharge that applies to second homes. Timing matters here—if there’s a delay, you might have to pay the surcharge temporarily and reclaim it later.
3. Second Home Buyers & Buy-to-Let Investors
If you’re buying a property as a second home, holiday home, or rental, you’ll pay an extra 3% surcharge on top of the standard rates.
Example:
Buying a £300,000 buy-to-let →
- Standard SDLT = £2,500
- 3% surcharge = £9,000
Total SDLT = £11,500
Key point: Even if you’re keeping your current home as a rental and moving into a new property, the surcharge applies unless you sell the first property within three years.
4. Overseas Buyers
If you’re not classed as a UK resident, there’s an additional 2% surcharge on top of SDLT. This can stack with the 3% surcharge for second homes, meaning some overseas investors face 5% extra in total.
Example:
Overseas buyer purchasing a second home in London at £500,000 →
- Standard SDLT = £12,500
- 3% second home surcharge = £15,000
- 2% overseas surcharge = £10,000
Total SDLT = £37,500
Definition of residency for SDLT: HMRC considers you a UK resident if you’ve been in the country for at least 183 days in the 12 months before the purchase.
5. Companies and Property Investment Firms
When companies buy residential property, the rules get stricter:
- A flat 15% SDLT rate applies to properties costing over £500,000—unless the property is bought for a genuine business purpose (such as letting out).
For genuine buy-to-let purchases, companies instead pay the standard rates plus the 3% surcharge.
Example 1 (Flat Rate):
Company buys a £600,000 property to hold privately → SDLT = 15% = £90,000
Example 2 (Rental Purpose):
Company buys a £600,000 property as a rental → Standard SDLT (£17,500) + 3% surcharge (£18,000) = £35,500
6. Mixed-Use and Commercial Property Buyers
Not every property falls neatly into the residential category. Mixed-use buildings (such as a shop with a flat above) and commercial properties benefit from lower non-residential SDLT rates:
- 0% up to £150,000
- 2% on £150,001 to £250,000
- 5% on anything above £250,000
Example:
Buying a mixed-use property for £500,000 →
- 0% on £150,000 = £0
- 2% on next £100,000 = £2,000
- 5% on remaining £250,000 = £12,500
Total SDLT = £14,500
Compared to a residential purchase of the same value (£500,000 = £12,500 SDLT for a mover or £27,500 for a landlord), this is often more tax efficient.
7. Special Circumstances
There are a few other situations worth noting:
- Shared ownership properties – SDLT can be paid upfront on the full value or in stages.
- Transfers due to divorce or separation – SDLT may not apply.
- Inherited property – No SDLT is paid when inheriting, only when purchasing.
Summary: Who Pays What?
- First-Time Buyer: No SDLT up to £300k; 5% up to £500k
- Home Mover: Standard residential SDLT
- Second Home/Investor: Standard rates + 3% surcharge
- Overseas Buyer: Standard rates + 2% surcharge (+3% if second home)
- Company Buyer: Flat 15% on £500k+ unless rental use; otherwise standard + 3%
- Mixed/Commercial Buyer: Lower non-residential SDLT rates
Final Thoughts
Stamp Duty Land Tax is one of the biggest costs when buying property in the UK, and the rules differ widely depending on who you are and what you’re buying.
- First-time buyers enjoy the most generous reliefs.
- Home movers pay standard rates.
- Second home buyers, landlords, and overseas investors face hefty surcharges.
- Companies and commercial buyers are taxed under entirely different rules.
Understanding your tax liability upfront ensures there are no nasty surprises when you complete your purchase. For larger purchases, it’s wise to seek advice from a solicitor or tax advisor, as the wrong assumptions can cost thousands.
For sellers, being aware of the tax challenges buyers face can help you anticipate negotiation points and better understand buyer behaviour.