Costs that do not count towards stamp duty land tax
When costs are left out of SDLT
Not every payment linked to a property deal increases the amount used for stamp duty land tax. The reason for the payment matters.
- Paying a seller’s bill can count as part of the deal.
- Specific inheritance tax and capital gains tax rules can exclude a payment.
- Some landlord costs on a lease grant are excluded.
Scroll down for the full analysis.
Read the original guidance here:
Costs that do not count towards stamp duty land tax
SDLT can reach beyond the headline price. If you agree to pay a seller’s bill, it may increase the amount used for SDLT. But some payments are left out. That difference can affect your bill.
What this rule is about
The starting point is broad: SDLT can apply to money or other value you give, directly or indirectly, to get a property. So the label on a payment does not settle the issue.
For example, paying the seller’s legal bill as part of the deal can count. You might think it is only a cost. In substance, though, you are meeting the seller’s expense.
There are specific exceptions. They cover some tax payments, certain lease costs and some compulsory-purchase payments.
What the official source says
HMRC’s manual explains that costs paid for the seller can form part of the SDLT consideration. It then identifies payments which HMRC says are treated differently. The manual is HMRC guidance, not the law itself.
- Costs under section 23 of the Compulsory Purchase Act 1965 do not count, according to HMRC.
- According to HMRC, disturbance compensation and similar compensation under section 5(6) of the Land Compensation Act 1961 do not count.
- Inheritance tax paid by someone receiving property as a gift, under a will or under intestacy does not count under Finance Act 2003.
- Capital gains tax paid on a gift or other non-arm’s-length transfer can be left out.
- That capital gains tax exception fails if any other amount is paid for the transfer.
- A tenant’s reasonable payment of a landlord’s costs on a lease grant is excluded.
- Specified leasehold enfranchisement costs are also excluded.
- When the lease ends, an agricultural tenant’s duty to transfer single payment scheme entitlements to the landlord is excluded.
What this means in practice
Do not add every payment connected with a property deal to the price. First ask what the payment is for. Then ask whether a specific SDLT rule excludes it.
When the contract requires a buyer to discharge a bill that the seller incurred, and that discharge forms part of the bargain for the property, it may count as value given for SDLT. Labels do not decide it.
- Keep the property price separate from each extra payment.
- Record who originally owed the cost.
- Check whether the payment was required by the contract or lease.
- For a gift, identify any inheritance tax or capital gains tax arrangement.
- For a lease, separate rent, a premium and landlord costs.
- Keep invoices and a written breakdown of the sums.
How to analyse it
The useful question is not simply, “Did I pay this?” It is: “What did I give to get the property?” That is where the analysis starts.
- List the stated price and every linked payment.
- Identify whether each sum goes to the seller, landlord, tax authority or someone else.
- Ask whether paying it meets an obligation that belonged to the seller or landlord.
- Check if the transfer is a gift, will, intestacy or a deal between connected people.
- If capital gains tax is involved, check carefully for any other amount paid.
- If this is a lease, read the clause that requires the tenant to meet the cost.
- Check whether the payment falls within a specific statutory exclusion.
- Make sure the SDLT calculation follows the real terms of the deal, not just its heading.
Example
Ravi receives a field from a relative as a gift. He agrees to pay £12,000 of capital gains tax arising from the transfer. He gives no cash, takes on no debt and provides no other value for the field. On those facts, the statutory capital gains tax exclusion can apply.
Now change one detail. Ravi also pays his relative £5,000 for the field. There is now another amount paid for the transfer. The special capital gains tax exclusion does not apply, so the figures need to be considered under the normal SDLT rules.
In a lease example, Mia takes a shop lease with a £60,000 premium. She also pays £4,000 of the landlord’s reasonable legal costs for granting the lease. For this purpose, HMRC’s guidance and the lease rules indicate that the £4,000 is not added to the premium.
Why this can be difficult in practice
This is the part people get wrong: a payment can look separate on paper but still be part of the bargain. The wording of the agreement, and the reason for the payment, matter more than its name.
Lease paperwork can be especially confusing. A landlord’s reasonable costs of granting a lease are treated differently from a premium, rent or a payment that changes what a tenant would pay in the open market.
- A seller’s legal bill is not automatically an excluded cost.
- A tax payment does not automatically fall within the inheritance tax or capital gains tax rules.
- The capital gains tax exception is particularly narrow where any other value changes hands.
- Compulsory-purchase compensation can contain several elements which need separating.
- A lease extension or enfranchisement arrangement may have different legal steps and payments.
- A vague invoice description may not show whether a cost was reasonable or linked to the lease grant.
Key takeaways
- The SDLT amount can include more than the stated property price.
- Some tax payments and lease costs are specifically left out.
- Check each payment’s purpose, legal basis and supporting documents.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- FA 2003 section 50 — schedule rules for the amount paid
- FA 2003 Schedule 4 para 1 — money or value given for the property
- FA 2003 Schedule 4 para 16A — inheritance tax paid on gifts and estates
- FA 2003 Schedule 4 para 16B — capital gains tax in non-arm’s-length transfers
- FA 2003 Schedule 4 para 16C — statutory leasehold enfranchisement costs paid by buyers
- FA 2003 Schedule 17A para 10 — tenant obligations excluded on a lease grant
Official guidance
The pages below are HMRC’s guidance. Guidance is not law. It sets out how HMRC reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. HMRC can also change or withdraw guidance, and it may not cover your facts.
Where this is not settled
- Whether a payment is really a seller’s cost, a landlord’s reasonable cost, compensation, or part of the price can depend on the contract and facts.
- The supplied HMRC page states that certain compulsory-purchase costs and disturbance compensation are excluded, but the detailed statutory basis for that statement was not supplied in the SDLT statutory extracts.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- The sale contract, lease or transfer document
- Any side letter or agreement about costs or tax payments
- Invoices showing who incurred each cost and why
- Evidence that a transfer was a gift, will, intestacy or non-arm’s-length arrangement
- For a lease, a clear breakdown of the landlord’s costs and the tenant’s obligations
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching UK Stamp Duty Land Tax (SDLT), which applies in England and Northern Ireland. MY QUESTION Costs that do not count towards stamp duty land tax [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - FA 2003 section 50 - schedule rules for the amount paid https://www.legislation.gov.uk/ukpga/2003/14/section/50/2025-11-17 - FA 2003 Schedule 4 para 1 - money or value given for the property https://www.legislation.gov.uk/ukpga/2003/14/schedule/4/paragraph/1/2025-11-17 - FA 2003 Schedule 4 para 16A - inheritance tax paid on gifts and estates https://www.legislation.gov.uk/ukpga/2003/14/schedule/4/paragraph/16A/2025-11-17 - FA 2003 Schedule 4 para 16B - capital gains tax in non-arm's-length transfers https://www.legislation.gov.uk/ukpga/2003/14/schedule/4/paragraph/16B/2025-11-17 - FA 2003 Schedule 4 para 16C - statutory leasehold enfranchisement costs paid by buyers https://www.legislation.gov.uk/ukpga/2003/14/schedule/4/paragraph/16C/2025-11-17 - FA 2003 Schedule 17A para 10 - tenant obligations excluded on a lease grant https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/10/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm03710 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. Guidance from HMRC is its view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - Whether a payment is really a seller's cost, a landlord's reasonable cost, compensation, or part of the price can depend on the contract and facts. - The supplied HMRC page states that certain compulsory-purchase costs and disturbance compensation are excluded, but the detailed statutory basis for that statement was not supplied in the SDLT statutory extracts. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show Finance Act 2003 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 1 September 2026
Useful article? You may find it helpful to read the original guidance here: Costs that do not count towards stamp duty land tax
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