How Stamp Duty Land Tax works on a London purchase in 2026: the bands, second-home and overseas surcharges, company purchases and what a buyer can plan for.
By Aldo Attanasio d’Aponte – September 9, 2026
Stamp duty on London property: rates, surcharges and how to plan for it
Stamp Duty Land Tax is the largest single cost of buying a home in London after the price itself, and unlike the price it is not negotiable. On a prime central London purchase it can run from around 4% of the price for a resident buying a main home to 19% for an overseas buyer adding to a portfolio. Anyone buying at this level should know the number before they make an offer, not after.
What is Stamp Duty Land Tax?
SDLT is a tax on the purchase of land and buildings in England and Northern Ireland. Scotland and Wales run their own equivalents with different names and bands. The buyer pays it, the seller does not, and it is due to HMRC within 14 days of completion. In practice the buyer’s solicitor calculates it, submits the return and pays it out of the completion funds, so the money must be in place alongside the purchase price.
The tax is charged in slices, not on the whole price at one rate. Each band is taxed at its own rate on the portion of the price that falls inside it. This is the point most people get wrong when they estimate the bill in their head, and it is why the effective rate is always lower than the top marginal rate.
What are the standard residential rates in 2026?
For a UK resident buying a property that will be their only home, the bands for 2026/27 are:
- 0% on the first £125,000
- 2% on the portion from £125,001 to £250,000
- 5% on the portion from £250,001 to £925,000
- 10% on the portion from £925,001 to £1.5 million
- 12% on everything above £1.5 million
On a £3 million house the bill is £273,750, an effective rate of just over 9%. On a £1 million flat it is £43,750. The same bands apply whether the property is freehold or leasehold, and there is no ceiling. Above £1.5 million every extra pound is taxed at 12% before any surcharge.
First-time buyers who are UK resident pay nothing on the first £300,000 and 5% up to £500,000, but the relief falls away entirely on purchases above £500,000, which excludes almost everything in prime central London.
What is the surcharge for second homes and investment property?
If the buyer already owns a residential property anywhere in the world, and the new purchase is not replacing their main home, an additional 5% applies across every band. A £1 million second home therefore costs £93,750 in SDLT rather than £43,750. A £3 million one costs £423,750.
The test is about ownership, not intention. A client who owns a flat in Milan and buys a London home as a base for the family pays the surcharge, even though the London property will be lived in more than the Milan one. Spouses and civil partners are treated as one unit, so a property owned by one partner counts against a purchase made by the other.
There is a refund route. If the new property is intended to be the main home and the previous main home is sold within 36 months, the 5% surcharge can be reclaimed from HMRC. The claim must be made within 12 months of the sale of the old home or the filing of the return, whichever is later. We have seen clients forget this deadline. It is worth diarising on the day of completion.
What do overseas buyers pay?
Buyers who are not UK resident for SDLT purposes pay a further 2% on top of whatever else applies. The residence test is specific to this tax: broadly, a buyer is non-resident if they have spent fewer than 183 days in the UK in the 12 months before completion. It is possible to reclaim the 2% by spending 183 days in the UK in a 12-month window that straddles the purchase, which is worth noting for anyone relocating.
For a joint purchase, if either buyer is non-resident the surcharge applies to the whole transaction. A UK-resident spouse does not shelter a non-resident one, except in limited cases where the couple live together.
Put together, the top marginal rates in 2026/27 are 12% for a resident main home, 14% for a non-resident main home, 17% for a resident buying an additional property and 19% for a non-resident doing the same. On a £5 million Belgravia house the range between those outcomes is roughly £350,000. That is not a rounding error; it is a serious sum that should shape how the purchase is structured and, sometimes, whether it happens at all.
Are there ways to pay less?
There are legitimate reliefs and there are structures that look clever and cost more than they save. A few of the real ones:
Mixed-use property. A building that is partly residential and partly commercial, a shop with flats above for example, is taxed at the non-residential rates: 0% to £150,000, 2% to £250,000 and 5% above that, with no surcharges. HMRC looks closely at these claims and a token commercial element will not qualify.
Six or more dwellings. A single transaction that includes six or more dwellings can be taxed at the non-residential rates. For an investor buying a whole block of flats, the difference against residential rates with the 5% surcharge is very large, and this is one of the reasons blocks are attractive to family offices. Multiple dwellings relief, which used to give a separate benefit for smaller multi-unit purchases, was withdrawn in 2024.
Company purchases. A company buying a residential property for more than £500,000 pays a flat 17% on the whole price, unless it qualifies for relief as a genuine property rental or development business. Companies that hold homes for the use of their owners also face the Annual Tax on Enveloped Dwellings every year. Corporate ownership is right for some clients and wrong for most; the SDLT position is only one part of that calculation.
Buying the shares of a company that owns the property rather than the property itself avoids SDLT, since shares attract stamp duty at 0.5% instead. It also means inheriting the company’s history, liabilities and tax position. This is a decision for the client’s tax adviser and solicitor, not a trick to be attempted without them.
I would add one thing from experience. A purchase that only works if a relief applies is a purchase that should be tested with the tax adviser before the offer is made, not after exchange. The cost of a wrong assumption at 5% or 7% of the price is far greater than the fee for the advice.
Why does stamp duty move the market?
Because it is paid up front and cannot be financed on ordinary terms, SDLT changes behaviour. When rates go up, transactions slow and sellers eventually adjust. When temporary reductions are announced, activity is pulled forward and prices rise to absorb the saving. The 2024 increase in the additional-property surcharge reduced the number of small landlords buying and has tightened rental supply in central London, which is part of why rents have held up.
There is periodic talk of replacing SDLT with an annual property tax. Nothing has been legislated as at the time of writing and buyers should plan on the basis of the current system. Rates and figures correct at the time of writing; confirm the current position before relying on them.
How Arbitrage can help
We act only for buyers, and we treat the SDLT bill as part of the price from the first conversation, not a surprise at completion. We model the tax for each client’s circumstances, coordinate with their tax adviser and solicitor on structure, and negotiate the purchase price knowing exactly what the all-in cost will be. Our average purchase is 12% below asking, which on most transactions covers the tax several times over.
Frequently asked questions
When do I have to pay stamp duty?
Within 14 days of completion. Your solicitor files the return and pays HMRC from the completion funds, so the money needs to be with them before completion day alongside the purchase price.
Do I pay the 5% surcharge if I am selling my old home at the same time?
No. If you are replacing your main residence and the old one is sold on or before completion of the new one, the surcharge does not apply. If the old one sells later, you pay the surcharge and reclaim it once the sale completes, provided that happens within 36 months.
Does owning property abroad count as owning a second home?
Yes. A residential property anywhere in the world owned by you or your spouse will trigger the additional-property surcharge on a London purchase unless the London property replaces your main residence.
Can stamp duty be added to the mortgage?
Not in the ordinary way. Lenders lend against the value of the property, and SDLT is a cost on top. Some private banks will lend against wider assets to cover it, which is one reason we coordinate with a client’s bank early.
Is stamp duty lower on leasehold flats?
No. The same bands apply to freehold and leasehold purchases. A separate small charge can apply to the rental element of a new long lease, but on an ordinary flat purchase it is rarely material.