Understanding the Higher Rates of Stamp Duty Land Tax (SDLT)
If you’re buying a property in England or Northern Ireland, you may have to pay a higher rate of Stamp Duty Land Tax. These additional rates apply in certain cases—especially if you already own another property, are buying through a company, or are purchasing for someone else such as a child.
This page provides a straightforward explanation of the rules set out in Schedule 4ZA of the Finance Act 2003, which governs when the higher rates apply.
Please note, this tool and guidance are for general information only and should not be relied upon as financial advice.
SDLT Higher Rates Explainer (Comprehensive)
This tool helps you understand if the higher rates of Stamp Duty Land Tax (SDLT) might apply to your property purchase. This is based on Schedule 4ZA of the Finance Act 2003. This is not financial advice.
Joint Purchasers: If you are buying with someone else, the rules apply to you as a group. If the higher rate applies to any one of the purchasers, the entire transaction is subject to the higher rate. Please answer the following questions considering the circumstances of all purchasers.
Note on Trusts: If you are buying as a trustee, the rules are complex. In certain cases (e.g., a life interest trust), the beneficiary's circumstances are considered. This tool may not give an accurate result; please seek professional advice.
Schedule 4ZA, Finance Act 2003: Higher Rates for Additional Dwellings
This is an extract of the legislation for reference purposes. Always refer to the official legislation for the most up-to-date and complete version.
Paragraph 2: Meaning of "higher rates transaction"
2(1) This paragraph explains how to determine whether a chargeable transaction is a "higher rates transaction" for the purposes of paragraph 1.
2(2) In the case of a transaction where there is only one purchaser, determine whether the transaction falls within any of paragraphs 3 to 7; if it does fall within any of those paragraphs it is a "higher rates transaction" (otherwise it is not).
2(3) In the case of a transaction where there are two or more purchasers— (a) take one of the purchasers and determine, having regard to that purchaser only, whether the transaction falls within any of paragraphs 3 to 7, and (b) do the same with each of the other purchasers. If the transaction falls within any of those paragraphs when having regard to any one of the purchasers it is a "higher rates transaction" (otherwise it is not).
Plain English Explanation
This section explains when the higher rates of stamp duty apply. The key point is that for joint purchases, if just one of the buyers would have to pay the higher rate when buying alone, then the whole purchase is subject to the higher rate. It's an "all or nothing" approach - you can't just pay the higher rate on one person's share.
Paragraph 3: Single dwelling transactions
3(1) A chargeable transaction falls within this paragraph if— (a) the purchaser is an individual, (b) the main subject-matter of the transaction consists of a major interest in a single dwelling ("the purchased dwelling"), and (c) Conditions A to D are met.
3(2) Condition A is that the chargeable consideration for the transaction is £40,000 or more.
3(3) Condition B is that on the effective date of the transaction the purchased dwelling— (a) is not subject to a lease upon which the main subject-matter of the transaction is reversionary, or (b) is subject to such a lease but the lease has an unexpired term of no more than 21 years.
3(4) Condition C is that at the end of the day that is the effective date of the transaction— (a) the purchaser has a major interest in a dwelling other than the purchased dwelling, (b) that interest has a market value of £40,000 or more, and (c) that interest is not reversionary on a lease which has an unexpired term of more than 21 years.
3(5) Condition D is that the purchased dwelling is not a replacement for the purchaser's only or main residence.
3(6) For the purposes of sub-paragraph (5) the purchased dwelling is a replacement for the purchaser's only or main residence if— (a) on the effective date of the transaction ("the transaction concerned") the purchaser intends the purchased dwelling to be the purchaser's only or main residence, (b) in another land transaction ("the previous transaction") whose effective date was during the period of three years ending with the effective date of the transaction concerned, the purchaser or the purchaser's spouse or civil partner at the time disposed of a major interest in another dwelling ("the sold dwelling"), (c) at any time during the period of three years referred to in paragraph (b) the sold dwelling was the purchaser's only or main residence, and (d) at no time during the period beginning with the effective date of the previous transaction and ending with the effective date of the transaction concerned has the purchaser or the purchaser's spouse or civil partner acquired a major interest in any other dwelling with the intention of it being the purchaser's only or main residence.
3(7) For the purposes of sub-paragraph (5) the purchased dwelling is also a replacement for the purchaser's only or main residence if— (a) on the effective date of the transaction ("the transaction concerned") the purchaser intended the purchased dwelling to be the purchaser's only or main residence, (b) in another land transaction whose effective date is during a permitted period, the purchaser or the purchaser's spouse or civil partner disposes of a major interest in another dwelling ("the sold dwelling"), and (c) at any time during the period of three years ending with the effective date of the transaction concerned the sold dwelling was the purchaser's only or main residence.
Plain English Explanation
This section covers the main rules for individuals buying a single property:
- If the property costs less than £40,000, the higher rates don't apply.
- If you'll own another property worth £40,000+ after your purchase, the higher rates usually apply.
- If the new property is replacing your main home, the higher rates don't apply - but only if you've sold your previous main home within the last 3 years, or will sell it within the next 3 years (in which case you can claim a refund).
For the replacement home exemption to apply, you must have actually lived in your previous property as your main home at some point in the last 3 years.
Paragraph 4: Non-individual purchasers
4 A chargeable transaction falls within this paragraph if— (a) the purchaser is not an individual, (b) the main subject-matter of the transaction consists of a major interest in a single dwelling, and (c) Conditions A and B in paragraph 3 are met.
Plain English Explanation
When a company or other entity (not an individual person) buys a residential property worth £40,000 or more, the higher rates automatically apply. Companies can't benefit from the "main residence" exemptions that are available to individuals.
Paragraph 5: Multiple dwelling transactions
5(1) A chargeable transaction falls within this paragraph if— (a) the purchaser is an individual, (b) the main subject-matter of the transaction consists of a major interest in two or more dwellings ("the purchased dwellings"), and (c) at least two of the purchased dwellings meet conditions A, B and C.
Plain English Explanation
If you're buying multiple properties in a single transaction (for example, a house with an annexe or a building with multiple flats), the higher rates will apply if at least two of those properties are worth £40,000+ each and count as separate dwellings. Note that Multiple Dwellings Relief was abolished for most transactions with effect from 1 April 2023, so you will typically pay the higher rates on the entire purchase.
Paragraph 7A: Exception where purchaser has prior interest in purchased dwelling
7A(1) A chargeable transaction which would (but for this paragraph) fall within paragraph 3 or paragraph 6 does not fall within that paragraph if— (a) the purchaser had a major interest ("the prior interest") in the relevant purchased dwelling immediately before the effective date of the transaction, and (b) the relevant purchased dwelling had been the purchaser's only or main residence throughout the period of three years ending with the effective date of the transaction.
Plain English Explanation
This provides an exemption for people who already own part of the property they're buying. For example, if you already own a share of your home and are buying the remaining share, the higher rates won't apply if you've been living there as your main home for the last 3 years.
Paragraph 9A: Spouses and civil partners purchasing from one another
9A(1) A chargeable transaction is not a higher rates transaction for the purposes of paragraph 1 if— (a) there is only one purchaser, (b) there is only one vendor, and (c) on the effective date of the transaction the two of them are— (i) married to, or civil partners of, each other, and (ii) living together (see paragraph 9(3)).
Plain English Explanation
If you're buying a property directly from your spouse or civil partner, and you're still living together, the higher rates of stamp duty don't apply to this purchase. This exemption only works when one person is buying from one person (not multiple owners or purchasers).
Paragraph 9B: Property adjustment on divorce, dissolution of civil partnership etc
9B(1) This paragraph applies where— (a) a person ("A") has a major interest in a dwelling, (b) a property adjustment order has been made in respect of the interest for the benefit of another person ("B"), and (c) the dwelling— (i) is B's only or main residence, and (ii) is not A's only or main residence.
9B(2) A is to be treated for the purposes of this Schedule as not having the interest in the dwelling.
Plain English Explanation
This deals with properties subject to a court order following a divorce or separation. If you legally own a property but your ex-partner lives there under a court order (and you don't), you're treated as if you don't own it for stamp duty purposes. This means it won't count as an "additional property" when you buy somewhere new.
Paragraph 12: Parents and children (settlements and bare trusts)
12(1) This paragraph applies where, by reason of paragraph 10 or 11 or paragraph 3(1) of Schedule 16, the child of a person ("P") would (but for this paragraph) be treated for the purposes of this Schedule as— (a) being the purchaser in relation to a land transaction, (b) holding an interest in a dwelling, or (c) having disposed of an interest in a dwelling.
12(2) Where this paragraph applies— (a) P and any relevant spouse or civil partner of P are to be treated for the purposes of this Schedule as being the purchaser, holding the interest or having disposed of the interest, and (b) the child is not to be so treated.
Plain English Explanation
When buying a property for a child under 18 (or if the child owns property through a trust), the tax system looks at the parents' situation instead of the child's. If the parents already own a home, buying a property for the child will usually count as an additional property and be subject to the higher rates of stamp duty.
Paragraph 14: Partnerships
14(1) Sub-paragraph (2) applies in relation to a chargeable transaction whose subject-matter consists of a major interest in one or more dwellings if— (a) the purchaser (or one of them) is a partner in a partnership, but (b) the purchaser does not enter into the transaction for the purposes of the partnership.
14(2) For the purposes of determining whether the transaction falls within paragraph 3 or 6 any major interest in any other dwelling that is held by or on behalf of the partnership for the purposes of a trade carried on by the partnership is not to be treated as held by or on behalf of the purchaser.
Plain English Explanation
If you're a partner in a business partnership that owns properties for business purposes, those business properties won't count as properties you own personally when determining whether your personal property purchase is subject to higher rates. This stops business properties from triggering the additional property surcharge on your personal purchase.
Paragraph 16: Major interests in dwellings inherited jointly
16(1) This paragraph applies where by virtue of an inheritance— (a) a person ("P") becomes jointly entitled with one or more other persons to a major interest in a dwelling, and (b) P's beneficial share in the interest does not exceed 50% (see sub-paragraph (4)).
16(2) P is not to be treated for the purposes of paragraph 3(4)(a) or 6(1)(e) as having the major interest at any time during the period of three years beginning with the date of the inheritance.
Plain English Explanation
If you inherit 50% or less of a property jointly with others, that inherited property won't count as an additional property you own for three years after inheritance. This gives you time to deal with the inherited property without it affecting the stamp duty on any property you buy during that time.