Do you pay higher SDLT when buying the flat above to turn two flats into one home?

Introduction

A common question in residential property transactions is whether Stamp Duty Land Tax (SDLT) can be reduced when someone already owns one flat in a building and wants to buy another flat in the same building so the whole property can be turned into a single family home.

People often assume that because the end result will be one home, the purchase might be treated as replacing or enlarging their existing residence. In most cases, that is not how the SDLT rules work. SDLT is generally tested by looking at what is being bought at the effective date of the transaction and what other dwellings the buyers already own.

The Question

A couple already own the ground floor flat in a building. They now want to buy the first floor flat, which is held under a separate legal title, and then combine the two flats into one larger home for their family.

The issue is whether there is any SDLT relief or exception that would stop the purchase of the second flat from being treated as the purchase of an additional dwelling and therefore subject to the higher residential rates.

Nick’s Explanation

Nick’s core view was that buying the upper flat while keeping the lower flat means the buyers are acquiring an additional property interest, not replacing their only or main residence. In anonymised form, his explanation was:

“If you keep the existing flat and buy the other flat under a separate title, you are buying an additional dwelling. That means the higher residential SDLT rates apply to the purchase price of the flat being acquired. There is no special relief simply because the intention is to merge the two into one larger home.”

That is the key practical point. The buyers already own one dwelling and are acquiring another. Unless a specific exception applies, the higher rates for additional dwellings apply.

The Law

SDLT on residential property is charged under Finance Act 2003.

The higher rates for additional dwellings are found in Schedule 4ZA to Finance Act 2003. Broadly, the higher rates apply where:

• the transaction is a major interest in a dwelling,
• the chargeable consideration is £40,000 or more,
• the purchaser already has a major interest in another dwelling, and
• the transaction is not excluded, for example because it is a replacement of the purchaser’s only or main residence.

The replacement of only or main residence exception is narrow. It normally applies where the buyer disposes of a previous only or main residence and buys a new one. If the buyer keeps the old dwelling and acquires another, the exception will usually not apply.

Where more than one dwelling is involved, SDLT may also raise questions about whether what is being bought is:

• a single dwelling,
• multiple dwellings, or
• property that is not suitable for use as a dwelling.

In an uninhabitable or not suitable for use case, the condition thresholds are now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That authority makes clear that substantial disrepair or the need for works will not easily take a property outside the dwelling rules. The test is stricter than many buyers assume.

Analysis

The SDLT analysis usually works as follows.

1. Identify what is being bought.

   Here, the buyers are acquiring the first floor flat under a separate title. At the point of purchase, that is a separate dwelling for SDLT purposes unless there is some unusual feature in the legal or physical position.

2. Check whether the buyers already own another dwelling.

   They do. They already own the ground floor flat.

3. Ask whether the new purchase replaces their only or main residence.

   On these facts, no. They are not disposing of the dwelling they already own. They are retaining it and adding another flat to it. The replacement exception therefore does not normally apply.

4. Consider whether the intention to combine the flats changes the SDLT result.

   Usually it does not. SDLT is charged on the land transaction that actually takes place. If the buyers purchase a separate flat and only later carry out works to combine the units, the later intention or later building works do not usually alter the SDLT treatment of the acquisition.

5. Consider whether any other relief might help.

   On these facts, there is generally no special relief simply because the purchase allows the creation of a larger family home. Reliefs must be found in legislation, and there is no general “merger of flats into one house” SDLT relief.

In practical terms, that means the purchase of the second flat is normally charged at the higher residential rates, meaning the standard residential SDLT calculation plus the additional higher-rate supplement.

Outcome

If you already own one flat and buy another flat in the same building under a separate title, while keeping the first flat, the purchase will usually be treated as the acquisition of an additional dwelling for SDLT purposes.

The fact that you intend to knock through and create one larger home does not usually prevent the higher residential rates from applying.

Practical Steps

Before exchange of contracts, a buyer in this position should:

• confirm whether the unit being bought is a separate legal title and a separate dwelling at the effective date,
• check exactly who owns the existing flat and who will buy the new one, because SDLT is tested by reference to the purchasers and their existing property interests,
• consider whether there is any genuine disposal of a previous only or main residence that could bring the replacement exception into play,
• review whether there is any realistic argument that the property being acquired is not suitable for use as a dwelling, bearing in mind the high threshold after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799,
• calculate SDLT on the basis that the higher rates are likely to apply unless a clear statutory exception is available, and
• take transaction-specific tax advice before completion if there is any unusual feature in the ownership structure, title arrangements, or physical condition of the property.

Conclusion

Buying the flat above or below your existing flat so that both can be turned into one larger home will usually still count as buying an additional dwelling for SDLT. If you keep your existing flat and acquire the second one under a separate title, the higher residential rates will normally apply, and there is generally no special relief just because the two units will later become one home.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 4ZA
• 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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