Property Tax — SDLT & Section 24
Stamp Duty Land Tax bands, the 3% additional-property surcharge, Section 24 mortgage interest restriction, and CGT on residential property disposals.
Property Tax — SDLT & Section 24
Property is the largest asset class for most UK households, and it attracts several taxes: Stamp Duty Land Tax (SDLT) on purchase, Income Tax on rental profit, and CGT on disposal.
Stamp Duty Land Tax (SDLT) — England & Northern Ireland
SDLT is charged on the purchase price of residential property in England and Northern Ireland (Scotland has LBTT; Wales has LTT).
Standard residential rates from 1 April 2025:
| Purchase price band | SDLT rate |
|---|---|
| Up to £125,000 | 0% |
| £125,001 – £250,000 | 2% |
| £250,001 – £925,000 | 5% |
| £925,001 – £1,500,000 | 10% |
| Over £1,500,000 | 12% |
Note: between September 2022 and 31 March 2025, the nil-rate threshold was temporarily £250,000.
First-time buyer relief (from 1 April 2025): 0% on the first £300,000 of properties up to £500,000.
The 3% Additional-Property Surcharge
If you already own a residential property and buy another (e.g. a buy-to-let or second home), you pay a 3% surcharge on top of the standard rates on every band.
Worked Example — Buy-to-Let Purchase at £300,000
| Band | Standard rate | Surcharge | Total rate | Tax |
|---|---|---|---|---|
| First £125,000 | 0% | 3% | 3% | £3,750 |
| £125,001 – £250,000 | 2% | 3% | 5% | £6,250 |
| £250,001 – £300,000 | 5% | 3% | 8% | £4,000 |
| Total SDLT | £14,000 |
Without the surcharge, the bill would be £2,500. The surcharge adds £9,000.
Section 24 — Mortgage Interest Restriction
Before April 2020, landlords could deduct mortgage interest from rental income as an expense. Under Section 24 (phased in from 2017 and fully effective from 2020-21), this deduction has been replaced with a basic-rate tax credit at 20%.
This means:
| Taxpayer | Before Section 24 | After Section 24 |
|---|---|---|
| Basic-rate | Relief at 20% | Relief at 20% (no change) |
| Higher-rate | Relief at 40% | Relief at 20% (tax increase) |
| Additional-rate | Relief at 45% | Relief at 20% (significant tax increase) |
Worked Example — Higher-Rate Landlord
Grace earns £60,000 salary and £12,000 in rental income, with £8,000 in mortgage interest.
| Before Section 24 | After Section 24 | |
|---|---|---|
| Taxable rental profit | £12,000 − £8,000 = £4,000 | £12,000 (full rent taxed) |
| Income Tax on rental at 40% | £1,600 | £4,800 |
| Less: 20% tax credit on interest | — | −£1,600 |
| Net tax on rental income | £1,600 | £3,200 |
Grace's tax bill on rental income has doubled.
Planning Around Section 24
- Incorporate. Companies are not affected by Section 24. Mortgage interest remains fully deductible against Corporation Tax (25%). However, incorporation triggers SDLT and CGT, so professional advice is essential.
- Reduce borrowing. Paying down the mortgage reduces the interest that is no longer fully deductible.
- Offset with pension contributions. A large pension contribution could bring your income back into the basic-rate band, reducing the Section 24 impact.
CGT on Residential Property
When you sell a residential property that is not your main home, you pay CGT at 18% (basic rate) or 24% (higher/additional rate).
Key points:
- You must report and pay within 60 days of completion.
- Private Residence Relief exempts your main home entirely.
- Letting Relief is now very limited (only applies if you shared occupation with the tenant).
- Improvement costs (extensions, renovations) can be added to the base cost.
This is educational content, not financial advice. Property tax is complex — consult a qualified tax adviser before buying, selling, or restructuring property holdings.
Explain Like I'm 5
When you buy a house, you have to pay a fee to the government called stamp duty — like an entrance ticket that gets more expensive the bigger the house is. If you already own one house and buy another, the ticket costs even more. If you rent the house out to someone and you borrowed money to buy it, you used to be able to subtract the loan cost before paying tax, but now the government only gives you a small discount instead. That means landlords pay more tax than they used to.
Key Takeaways
- The 3% SDLT surcharge on additional properties significantly increases the cost of buy-to-let purchases.
- Section 24 restricts mortgage interest relief to 20% — a major tax increase for higher-rate landlord taxpayers.
- CGT on residential property is 18%/24% and must be reported within 60 days of completion.
- Incorporating a property business can restore full interest deductibility but triggers other taxes.
Model your property portfolio's tax position and net yield in CoreFi.
Get started freeEducational only - not financial advice