Understanding SDLT: Including Vendor’s Legal Costs in Property Purchase Price

SDLT and the Buyer Paying the Seller’s Legal Costs

If a buyer agrees to pay the seller’s legal costs as part of a property deal, that payment will usually be added to the purchase price when calculating SDLT. The tax is based on the full value given for the property, not just the price stated in the contract.

• If the buyer pays a cost that is really the seller’s liability, it can count as chargeable consideration for SDLT.
• HMRC’s example treats a £400,000 price plus £7,000 of the seller’s legal costs as total consideration of £407,000.
• A lower agreed purchase price does not stop the extra payment being included if it was part of the bargain for the property.
• The key issue is the substance of the deal: what the buyer gave in order to acquire the property.
• When checking a transaction, review the contract, correspondence and completion statement to see whether the buyer’s payment of the seller’s costs formed part of the sale terms.

Scroll down for the full analysis.

SDLT and paying the seller’s legal costs

This page explains a simple but important SDLT point: if the buyer agrees to pay the seller’s legal costs as part of the deal, those costs are usually added to the price when working out the chargeable consideration. In other words, SDLT is charged on the total value the buyer gives for the property, not just the headline purchase price.

What this rule is about

SDLT is charged by reference to the chargeable consideration for a land transaction. That means you need to identify everything the buyer gives in return for the property. Sometimes the contract price is not the whole story. A buyer may also agree to meet costs that would otherwise be the seller’s responsibility.

The source material deals with one example of this: the buyer agrees to pay the seller’s legal costs. The key issue is whether that payment is part of what the buyer gives for the property. HMRC’s example says that it is.

What the official source says

The official example describes a property originally marketed at £415,000. After negotiation, the seller agrees to reduce the price to £400,000, and the buyer agrees to pay the seller’s legal costs of £7,000, including VAT. On completion, the buyer pays £400,000 plus the £7,000 legal costs.

HMRC’s conclusion is that the chargeable consideration is £407,000. The reasoning is that SDLT is charged on what has been given for the property. On these facts, the buyer has given both the reduced purchase price and the amount of the seller’s legal costs as part of the bargain.

What this means in practice

You should not assume that SDLT is calculated only on the stated purchase price in the transfer or contract. If the buyer agrees to discharge a liability of the seller, that can form part of the consideration for the land transaction.

In practical terms, if the seller says, “I will accept a lower price if you also pay my legal fees,” the buyer has still given that extra amount in order to acquire the property. HMRC’s example treats that extra payment as part of the SDLT base.

This matters because even relatively small additional amounts can affect the SDLT calculation. The point is not limited to legal costs as a matter of commercial common sense, although this page is specifically about legal costs. The wider principle is that SDLT looks at the substance of what the buyer gives for the property.

How to analyse it

When reviewing a transaction, ask these questions:

• Has the buyer agreed to pay an amount that is really the seller’s expense or liability?
• Was that payment part of the deal for acquiring the property?
• Was the purchase price reduced because the buyer took on that extra payment?
• What was actually paid on completion, and to whom?
• Do the contract, correspondence, or completion statement show that the payment was part of the consideration for the land?

If the answer shows that the buyer paid the seller’s legal costs as part of the purchase bargain, the official example indicates that those costs should be included in chargeable consideration.

Example

Illustration: A seller is asking £500,000 for a property. The parties agree instead that the buyer will pay £490,000 and also meet the seller’s conveyancing bill of £6,000. If that arrangement is part of the agreed terms for the sale, the amount given for the property is likely to be treated as £496,000, not just £490,000.

Why this can be difficult in practice

The main difficulty is identifying whether a payment is truly part of the consideration for the property, or whether it is something else. The source example is straightforward because the facts clearly link the reduced price and the buyer’s agreement to pay the seller’s legal costs.

Real transactions are not always set out so neatly. Documents may refer only to a purchase price, while side correspondence or completion arrangements show that the buyer also agreed to meet a seller expense. In those cases, the legal and factual analysis turns on the real bargain between the parties.

Another practical issue is that buyers often focus on the amount paid directly to the seller, but SDLT is concerned more broadly with what is given for the property. A payment can still count even if it is paid to a third party, if in substance it satisfies the seller’s obligation as part of the purchase arrangement.

Key takeaways

• Paying the seller’s legal costs can form part of the chargeable consideration for SDLT.
• A reduced purchase price does not prevent the extra payment being taxed if it is part of the bargain for the property.
• The key question is what the buyer has given, in substance, to acquire the property.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding SDLT: Including Vendor’s Legal Costs in Property Purchase Price

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