If you’re planning to purchase property in the UK, you’ll need to understand Stamp Duty Land Tax (SDLT) and how it applies to your property purchase. This blog covers the SDLT rates for the 2025/26 tax year, offering insights into residential, non-residential, and mixed-use properties, along with useful reliefs and exemptions.
What is Stamp Duty Land Tax?
Stamp Duty Land Tax (SDLT) is a tax that buyers in England and Northern Ireland must pay when purchasing property or land. The amount you pay depends on various factors such as the price of the property, whether it’s a first-time purchase, and whether you are buying an additional property like a second home or buy-to-let investment.
Updated SDLT Rates for 2025/26
Starting from March 2025, new SDLT rates have come into effect, replacing temporary thresholds introduced in September 2022. These changes affect first-time buyers, additional property buyers, and those purchasing buy-to-let properties. Notably, non-UK residents will continue to face an additional 2% surcharge on the standard SDLT rates.
SDLT Rates for Residential Property
For those purchasing residential properties in England and Northern Ireland, SDLT is based on the property price. The rates are as follows:
Freehold and Leasehold Premiums
- Up to £125,000: 0%
- £125,001 to £250,000: 2%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Over £1.5 million: 12%
These rates apply if the property will be your primary residence and you own no other residential property.
Leasehold Rent (Net Present Value)
For leasehold purchases where the rent exceeds a nominal amount, SDLT is also charged on the Net Present Value (NPV) of the rent. The rates for NPV of rent are:
- Up to £250,000: 0%
- Over £250,000: 1% on the excess
SDLT for Non-Residential and Mixed-Use Properties
Non-residential properties or mixed-use properties (those with both residential and non-residential elements) follow different SDLT rates. These properties include commercial buildings like shops, agricultural land, forests, and land unsuitable for residential use.
SDLT Rates for Freehold Sales and Lease Premiums
- Up to £150,000: 0%
- £150,001 to £250,000: 2%
- Over £250,000: 5%
SDLT on Leasehold Rent (Net Present Value)
For leasehold properties, SDLT applies to the NPV of the rent:
- Up to £150,000: 0%
- Over £150,000: 1%
SDLT on Leasehold Properties
When purchasing a leasehold property, SDLT is applied to both the lease premium and the rent. The rates are as follows:
Residential Leasehold Purchases
- Lease Premium:
- Up to £250,000: 0%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Over £1.5 million: 12%
- Rent (Net Present Value):
- Up to £250,000: 0%
- Over £250,000: 1% on the excess
Non-Residential Leasehold Purchases
- Lease Premium:
- Up to £150,000: 0%
- £150,001 to £250,000: 2%
- Over £250,000: 5%
- Rent (Net Present Value):
- Up to £150,000: 0%
- £150,001 to £5 million: 1%
- Over £5 million: 2%
Reliefs and Exemptions for SDLT
There are several reliefs and exemptions available that could reduce or even eliminate the SDLT you owe. Here are the key ones:
First-Time Buyer Relief
First-time buyers can benefit from SDLT relief if the property costs £500,000 or less. The relief works as follows:
- 0% SDLT on the first £300,000
- 5% SDLT on the portion between £300,001 and £500,000
If the purchase price exceeds £500,000, the standard SDLT rates apply to the entire amount.
Other Reliefs
- Builder’s Relief: Builders purchasing a homeowner’s existing property for the purpose of selling a new home may be exempt from SDLT under certain conditions.
- Employer’s Relief: Employers buying an employee’s home for job relocation may qualify for SDLT exemption.
- Charity Purchases: Charitable organizations purchasing property for charity-related purposes can claim relief.
- Right to Buy: Properties purchased under the Right to Buy scheme are taxed based on the discounted price, not the market value.
- Group Transactions: Companies transferring property within the same group may be eligible for group relief, exempting the transaction from SDLT.
Exemptions from SDLT
Some property transactions are completely exempt from SDLT. These include:
- Gifts: Property transfers where no money changes hands.
- Inheritance: Property acquired through inheritance.
- Divorce: Property transfers between spouses or civil partners due to divorce or dissolution.
- Low-Value Transactions: Certain low-value property transactions, including properties bought for under £40,000 or new leases with low premiums or rents, are exempt.
- Alternative Finance: Property acquired through alternative finance arrangements compliant with Sharia law is exempt.
Conclusion
Navigating SDLT rates and reliefs can be complicated, but understanding the tax implications of your property purchase is crucial. Whether you’re a first-time buyer, a property investor, or purchasing non-residential property, knowing which rates apply and what reliefs are available can help you manage your tax obligations. Make sure to consult with a tax professional or use an SDLT calculator to ensure you’re paying the correct amount.
