Do you pay SDLT when buying an HMO as a first-time buyer?

Introduction

People often search for this issue when they are buying a house in multiple occupation, or HMO, as an investment and are unsure whether first-time buyer status removes the Stamp Duty Land Tax, or SDLT, charge. Confusion often arises because HMOs can fall into different SDLT categories depending on the facts, and leasehold purchases can also raise separate questions about rent.

The key point is that SDLT depends on what is being bought, who is buying it, and whether the purchase is treated as residential or non-residential for SDLT purposes. In some cases, an individual buying an HMO in their own name may have no SDLT to pay at all. In other cases, a company buying the same property may face a significant SDLT bill.

The Question

A first-time buyer planned to buy an HMO for £148,000 in their own name. They had been told by one adviser that SDLT might be around £9,000, but had also been told that as a first-time buyer they might pay no SDLT. They wanted to know:

• whether SDLT was payable at all;
• whether it made any difference that the property was leasehold;
• whether SDLT could also be charged on projected rental income under the lease; and
• whether the answer would change if the buyer used a limited company instead of buying personally.

Nick’s Explanation

Nick’s main point was that if the HMO was being bought in the buyer’s own name, and it was their first property, the higher rates for additional dwellings would not apply because it was not an additional property.

In anonymised form, he explained:

“If you are purchasing the HMO in your own name and you are a first-time buyer, it will not be subject to higher rates of stamp duty since it is not an additional property. Therefore, you would not pay any stamp duty on this property.”

He also explained that the position would differ if the buyer used a company:

“If you purchased the HMO through a limited company, it would then be subject to the stamp duty rate applicable to corporate entities.”

On the leasehold point, Nick asked about the term of the lease and noted that a lease of under 21 years can affect SDLT treatment. Where the lease is a normal long lease, that issue usually falls away.

On rent, he explained that any SDLT charge on the lease rent would be small or nil where the main value lies in the premium paid for the lease and any rent element is low. In the scenario described, his view was that there was no practical SDLT liability arising from the rent.

He also added an important practical warning for the future. If a person buys an investment property in their own name first, and later buys their own home, that later home purchase may be subject to the higher rates for additional dwellings because they already own another dwelling at that point.

The Law

SDLT is charged under the Finance Act 2003. The amount payable depends on whether the transaction is:

• residential;
• non-residential or mixed;
• subject to the higher rates for additional dwellings; and
• freehold or leasehold.

For leasehold transactions, SDLT can potentially arise on two separate elements:

• the premium paid for the lease; and
• the net present value of the rent payable under the lease.

HMRC’s guidance on leasehold SDLT treatment appears in the SDLT Manual, including SDLTM13100.

A lease granted for 21 years or more is generally treated as a major interest in land for SDLT purposes. That matters because the higher rates for additional dwellings apply to purchases of major interests in dwellings, subject to the detailed statutory conditions.

First-time buyer relief is a separate concept. It applies only where the statutory conditions are met. A person may be a first-time buyer in the ordinary sense but still need to consider whether the property they are buying qualifies for that relief. In practice, HMOs often raise classification questions, so the result is not always based simply on the words “first-time buyer”.

If a company buys a dwelling, the SDLT rules are different. Companies do not benefit from first-time buyer relief, and company purchases of dwellings commonly attract the higher residential rates.

Analysis

There are four main steps in analysing this kind of purchase.

First, identify who is buying. If an individual is buying their first property in their own name, the higher rates for additional dwellings usually do not apply because they do not already own another dwelling. If a company is buying, the company does not get first-time buyer treatment and may face higher residential SDLT rates.

Second, identify what is being bought. An HMO can still be a dwelling for SDLT purposes. In the scenario described, the advice proceeded on the basis that the transaction did not create an SDLT charge for the individual buyer at the £148,000 price. That is consistent with a transaction falling below the relevant SDLT threshold for the applicable treatment and not attracting the surcharge.

Third, consider whether the leasehold nature of the property changes anything. A long lease, such as one with many decades or centuries left to run, is usually treated much like a freehold purchase for these purposes. A short lease of under 21 years can change the analysis, which is why the lease length matters. Here, the lease term was very long, so that point did not create a problem.

Fourth, consider whether rent under the lease creates a separate SDLT charge. Leasehold SDLT can be charged on rent using a net present value calculation. But in many ordinary long-lease residential transactions, the rent is low enough that this does not create any meaningful SDLT liability. On the facts described, Nick’s view was that there was no SDLT to consider on the rent element.

There is also a longer-term planning issue. If a person buys an HMO in their own name now and later buys a home to live in, the later home purchase may be treated as the purchase of an additional dwelling. That can trigger the higher rates on the later purchase unless an exception applies. That future consequence is separate from the SDLT position on the current HMO purchase.

Outcome

On the facts described, the practical conclusion was:

• if the HMO is bought by the individual in their own name, there is no SDLT payable on the purchase price stated;
• the fact that it is leasehold does not change that result where the lease is a normal long lease;
• there is no meaningful SDLT liability on the rent element in the scenario described; and
• if the same property were bought through a limited company, SDLT would be payable under the company rules and the amount could be significantly higher.

Practical Steps

If you are checking your own position, take these steps before exchange:

1. Confirm whether you are buying in your personal name or through a company.
2. Check whether you already own, or have previously owned, any dwelling anywhere in the world.
3. Confirm whether the property is being treated as a dwelling for SDLT purposes.
4. Check whether the title is freehold or leasehold.
5. If leasehold, confirm the unexpired term and the annual rent.
6. Ask for the SDLT calculation to be broken down clearly between premium and rent.
7. Consider the effect on any future purchase of a home to live in if you keep the HMO in your own name.

If the property is said to be uninhabitable or not suitable for use as a dwelling, that argument now faces a relatively high threshold following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. A buyer should not assume that disrepair alone will take a property outside the dwelling rules.

Conclusion

An individual buying an HMO as their first property in their own name may have no SDLT to pay, depending on the price and the transaction details. A long lease usually does not change that result, and low lease rent often creates no practical extra SDLT charge. But buying through a company is different, and owning the HMO personally may affect the SDLT position on a future home purchase.

Legal References Used

• Finance Act 2003
• HMRC Stamp Duty Land Tax Manual, SDLTM13100
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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