SDLT Planning Guide 2026/27:Reliefs, Strategies and the 5% Surcharge

Stamp Duty Land Tax (SDLT) is often the largest transaction cost on a property purchase — and one of the most misunderstood. The 5% additional dwelling surcharge has made buy-to-let and second home purchases significantly more expensive, but a number of reliefs and planning points can legitimately reduce the bill.

This 2026/27 guide covers the full rate structure, available reliefs, and practical planning strategies.

Residential SDLT Rates 2026/27

The 5% Additional Dwelling Surcharge

The surcharge applies to purchases of additional residential properties — buy-to-let, second homes, and holiday properties — where the buyer already owns a residential property anywhere in the world.

Key SDLT Reliefs

Corporate and Structure Considerations

Companies buying residential property above £500,000 face a flat 17% SDLT rate. For purchases below £500,000, the standard residential rates plus 5% surcharge apply.

SDLT Worked Examples: Real Purchase Scenarios

The interaction of standard rates, the 5% additional dwelling supplement (ADS, from October 2024), reliefs and the corporate flat rate produces SDLT outcomes that aren’t always obvious from the headline rate table. The examples below use 2026/27 rates.

Example 1: First-time buyer, £450,000 flat

A first-time buyer purchasing a £450,000 flat as their only or main residence claims First-Time Buyer Relief. The first £425,000 is taxed at 0%, the next £25,000 at 5%. SDLT due: £1,250. Without the relief, the standard rate would have applied (£0 to £250k at 0%, £250k to £450k at 5%) = £10,000. The relief saves £8,750.

The relief is forfeited if the purchase price is above £625,000 (cliff edge — at £625,001 you fall entirely out of the relief and pay full standard rates). Plan accordingly if you’re near this boundary; reducing the purchase by £2,000 to stay under can save £5,000+ in SDLT.

Example 2: Higher-rate buyer, £650,000 main residence

An existing homeowner sells their previous main home and buys a new one for £650,000, completing on the same day. No 5% ADS applies (only one dwelling owned at end of day). Standard residential rates: £0 to £250,000 at 0% = £0; £250,001 to £650,000 at 5% = £20,000. SDLT due: £20,000.

Crucial detail: if completion of the sale of the old home is delayed beyond the new purchase, the 5% ADS applies on the new purchase (£32,500 extra) and you have 36 months from the new purchase to sell the old and claim a refund. Many buyers don’t realise this and pay the surcharge without claiming it back later.

Example 3: Second home / buy-to-let, £400,000

A higher-rate taxpayer purchasing a £400,000 buy-to-let property in their personal name. Standard residential rates: £0 to £250k at 0%, £250k to £400k at 5% = £7,500. Plus the 5% ADS on the entire purchase price = £20,000. Total SDLT: £27,500.

Compared with buying as a first-time buyer (£8,750 saving), the BTL purchaser pays £27,500 more on the same property. SDLT is the single biggest barrier to property investment for many new landlords.

Example 4: Limited company purchase, £700,000

A limited company purchasing a £700,000 residential property. The flat 17% corporate rate applies — total SDLT = £119,000. This compares with the personal route at standard rates plus ADS (~£42,500), so company purchase of dwellings above £500k is almost always more expensive on SDLT alone. The case for company ownership therefore depends on the ongoing tax savings (Section 24, corporation tax vs higher-rate income tax) outweighing the higher one-off SDLT, which usually only pays back over 7+ years for mortgage-financed BTL portfolios.

Example 5: Multiple dwellings relief on a 3-property purchase

An investor buys three flats in a single transaction for £900,000 total (average £300,000 each). With multiple dwellings relief (MDR — abolished from June 2024 but worth knowing the principle remained valid for transactions before then), SDLT is calculated on the average dwelling price (£300,000) then multiplied by the number of dwellings. This typically resulted in a substantial saving on portfolio purchases. Important: MDR is no longer available for transactions completing after 1 June 2024. For multi-property purchases in 2026/27, the entire consideration is now taxed at standard residential rates (or non-residential if mixed-use applies), making bulk acquisitions materially more expensive than they were pre-2024.

Common SDLT Mistakes That Cost Buyers Money

1. Paying the 5% surcharge unnecessarily

The most common error: buyers assume the ADS applies because they “have another property” without checking the rules. The surcharge applies only if at the end of the day of completion you own two or more dwellings AND the new purchase is not replacing your main residence. If you’re selling and buying on the same day (or have sold and are now buying), the surcharge typically doesn’t apply. Read the rules carefully or get advice.

2. Missing the 36-month refund window

If you bought a new home before selling the old, you paid the 5% ADS. You can claim it back if you sell the old home within 36 months of the new purchase. Thousands of buyers each year forget to claim. The refund claim is filed with HMRC after the old home sells and typically pays within 3 months. The form is SDLT16.

3. Confusing exchange and completion for SDLT purposes

SDLT becomes payable on the “effective date of transaction” — usually completion, but for some transactions (notably substantial performance, like early occupation), it can be earlier. Get this wrong on the SDLT1 return and you’ll either be late or pay early. Conveyancers usually handle this, but check that they have.

4. Mixed-use property assumptions

A property with both residential and commercial elements (e.g. a flat above a shop, a farm with a farmhouse) is taxed at the lower non-residential rates rather than residential. The savings can be substantial — non-residential rates top out at 5% versus 12% for residential, plus no ADS. But HMRC has been challenging mixed-use claims aggressively since 2019, particularly for properties where the commercial element is minimal (e.g. a paddock attached to a house). Get clear evidence of genuine commercial use before claiming mixed-use treatment.

5. Forgetting the Welsh and Scottish equivalents

SDLT applies to property in England and Northern Ireland only. Welsh property is subject to Land Transaction Tax (LTT) and Scottish property to Land and Buildings Transaction Tax (LBTT). The rates, bands, reliefs and surcharges are all different. Don’t apply SDLT thinking to a Cardiff or Edinburgh purchase — you’ll either over- or under-budget, both painful.

6. Skipping First-Time Buyer Relief on shared ownership

For shared ownership purchases, FTB relief can be claimed either on the initial share purchase (using the market value of the whole property) or, alternatively, only on the initial share with subsequent staircasing taxed separately. The latter is usually preferable for buyers whose initial purchase is above the £625k threshold but whose share value is below it. Most first-time buyers don’t realise this election exists.

Frequently Asked Questions

How is SDLT actually paid?

SDLT is paid by your conveyancer on your behalf at completion. The SDLT1 return must be filed within 14 days of the effective date of transaction (usually completion). Your conveyancer collects the SDLT from the funds you provide at completion and remits it to HMRC, then files the return. As the buyer you remain ultimately responsible for the return being filed correctly even though the conveyancer handles the mechanics.

Can SDLT be financed in the mortgage?

Not directly. SDLT must be paid in cash at completion. However, lenders may permit a higher loan-to-value ratio that effectively releases enough equity to cover SDLT — for example, if you have a larger deposit available you can use part of it for SDLT and borrow a fraction more. The practical effect is the same; the mechanical answer is that SDLT can’t be added to the mortgage as a line item.

What if I buy from my company or sell to my company?

SDLT applies on transfers between connected parties at market value, not at the actual consideration paid. So if you sell a property to your own company for £1, SDLT is charged on the market value of the property (with the flat 17% rate if value is above £500,000). The connected-party rules prevent SDLT avoidance via undervalue transfers.

Is SDLT recoverable as an investment cost?

SDLT paid on the purchase of a buy-to-let property is added to the property’s base cost for capital gains tax purposes — so it reduces the CGT on eventual sale. It is not a deductible expense against rental income. For a higher-rate landlord, the SDLT effectively converts into a deferred CGT saving at the property’s eventual disposal.

What about gifted property?

A genuine no-consideration gift of property between individuals (e.g. parent to adult child) typically triggers no SDLT, because there is no chargeable consideration. However, if the property has an outstanding mortgage that the recipient takes on, the assumed mortgage liability counts as consideration and SDLT may apply on that amount. Gifts to spouses are typically exempt by spousal exemption.

Do I need to file an SDLT return for a transaction with no tax to pay?

Generally yes — most property transactions require an SDLT return even if no tax is due (e.g. purchase below the £250,000 threshold for non-first-time buyers, or first-time buyer relief brings tax to zero). The exception is purely intra-family transfers below relevant thresholds. When in doubt, file the return. Late filing penalties start at £100.

How does SDLT interact with property auction purchases?

SDLT works exactly the same on auction purchases as on private treaty purchases — based on the hammer price (or the contract price if there’s a separate contract for chattels). Completion typically happens 28 days after the auction, so the SDLT return must be filed within 14 days of completion. Auction-specific timing pitfalls: if you’re using an auction purchase to replace a main residence, the same-day completion rule for avoiding the 5% ADS rarely lines up with auction completion timetables, so you may pay the ADS and claim a refund later when the old home sells. Factor the cash-flow impact into the budget.

Shamim Bhuiyan FCCA CTA BSc

Founder & Managing Director, The Tax Lead  ·  Property Tax Specialist

Property tax is one of The Tax Lead’s deepest specialisms. Shamim holds the CTA — the UK’s highest tax qualification — and advises on SDLT planning, Section 24, CGT and property portfolio structuring.

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