When diving into the world of property, especially in the UK, understanding the taxes involved is crucial. Two of the most common taxes buyers and sellers encounter are Stamp Duty Land Tax (SDLT) and Capital Gains Tax (CGT). Whether you’re purchasing your first home or selling an investment property, these taxes can significantly affect your overall financial outcome.
Let’s explore the essentials of both taxes, who they apply to, and how to manage them wisely.
What is Stamp Duty?
Stamp Duty Land Tax is a tax you must pay when you buy property or land in England and Northern Ireland over a certain price threshold. Introduced to replace the older “stamp duty”, SDLT applies to both residential and non-residential purchases.
As of 2025, here’s how the Stamp Duty thresholds currently work for residential properties:
- Up to £250,000 – 0%
- £250,001 to £925,000 – 5%
- £925,001 to £1.5 million – 10%
- Over £1.5 million – 12%
If you’re a first-time buyer, you benefit from a reduced threshold:
- No SDLT on the first £425,000 of the property price
- 5% on the portion from £425,001 to £625,000
However, if the purchase price is over £625,000, the normal rates apply.
Additional Property? Expect a Surcharge
If you’re buying a second home or a buy-to-let investment, you’ll typically face a 3% surcharge on top of the standard SDLT rates. This applies even if the property is below the £250,000 threshold. The government introduced this to deter speculative property investment and to give owner-occupiers a better chance in the market.
When and How Do You Pay?
Stamp Duty must be paid within 14 days of completing your property purchase. Usually, your solicitor or conveyancer handles this on your behalf and includes it in your overall completion costs.
Exemptions and Reliefs
Some exemptions and reliefs are available depending on your situation. For example:
- Transfers of property due to divorce or dissolution of a civil partnership are exempt.
- Certain charities and registered social landlords may also qualify for reliefs.
Always check the latest HMRC guidance or speak with a solicitor to ensure you’re not missing out on valuable reliefs.
What is Capital Gains Tax?
Capital Gains Tax (CGT) applies when you sell a property that isn’t your main home and make a profit (a ‘gain’) from the sale. This tax is designed to capture some of the wealth generated from increased property values over time.
When Does CGT Apply?
You might owe Capital Gains Tax if you:
- Sell a rental property
- Sell a holiday home
- Sell a second residence
- Inherit property and later sell it for a profit
If you’re selling your primary residence, you’re generally exempt under Private Residence Relief — though certain conditions apply.
Calculating Your Gain
To determine your taxable gain:
- Take the sale price of the property.
- Subtract the original purchase price.
- Deduct any allowable expenses (e.g. solicitor fees, estate agent fees, cost of improvements).
- The resulting amount is your gain — or loss.
As of the current tax year, the annual exempt amount for individuals is £3,000. Any gain above this threshold is taxed:
- 18% for basic rate taxpayers
- 28% for higher/additional rate taxpayers
These rates apply to property gains only — other asset classes (like shares) may be taxed at lower CGT rates.
How Do You Pay CGT?
If you’re liable for CGT on the sale of a UK residential property, you must:
- Report the gain to HMRC
- Pay the tax within 60 days of the sale’s completion
This is a relatively recent change — previously, reporting was done via the self-assessment tax return. Now, quicker reporting is required for property sales, so it’s wise to act promptly.
Tax Planning Tips for Property Owners
- Track Expenses – Keep detailed records of all buying, selling, and improvement costs. They can be deducted from your gain.
- Consider Joint Ownership – If you co-own a property with a spouse or partner, both of your CGT exemptions may apply, reducing the tax owed.
- Time the Sale – If you’re nearing a new tax year, selling after April 6th may give you access to another annual exemption.
- Use a Trust or Company Structure – In some cases, holding property in a company may result in lower taxes, but be cautious — this brings complexity.
Final Thoughts
Understanding property taxes isn’t just about compliance — it’s about smart financial planning. With changing rules and thresholds, getting familiar with Stamp Duty and Capital Gains Tax is more important than ever.
If you’re considering buying or selling property, it’s wise to get tailored advice from experts who understand your local market. That’s where experienced Biggleswade estate agents come in. They can provide insights not only on property values and trends but also help you factor in the tax implications of any transaction.
Remember: taxes shouldn’t surprise you. With good planning, they can be managed — or even reduced — legally and efficiently.
