Is Stamp Duty Tax Deductible

Stamp Duty Land Tax (SDLT) is a significant cost when buying property in England and Northern Ireland. It is a one-off charge based on the purchase price of land or property, and the rate depends on whether the buyer is an individual, a company, or a landlord purchasing an additional property.

Many property buyers and investors want to know whether stamp duty is tax deductible in the UK. The short answer is that stamp duty is not tax deductible against income. However, it may still reduce future Capital Gains Tax when the property is sold, and in some cases, it can be treated as a business expense for companies.

This article explains how stamp duty is treated for tax purposes, when relief applies, and how the rules differ for homeowners, landlords, and companies.

Stamp Duty on Residential Purchases

Stamp duty is payable by the buyer when purchasing residential property over a certain threshold. For most homeowners, this is a personal cost that does not qualify for tax relief. It cannot be deducted from income tax, and it is not included in the costs of running a property.

This applies whether:

• You are buying your main home

• You are moving house

• You are purchasing a second home for personal use

As far as HMRC is concerned, stamp duty is part of the cost of acquiring the property and is therefore a capital expense. It does not reduce your Income Tax bill and cannot be claimed on a Self Assessment tax return unless the property is used for income-generating purposes.

Stamp Duty and Buy-to-Let Properties

If you purchase a residential property to let out, the rules still do not allow you to deduct stamp duty from your rental profits. It is not classed as a revenue expense. That means:

• It cannot be deducted from rental income when calculating your yearly tax bill

• It is not eligible for capital allowances

• It does not qualify for relief as part of your ongoing letting expenses

However, SDLT paid on a rental property does reduce your future Capital Gains Tax liability. When you sell the property, you are taxed on the gain (the difference between the sale proceeds and the purchase cost, less certain allowable expenses).

Stamp duty, along with other purchase costs such as legal fees and survey fees, is added to the base cost of the property. This increases your acquisition cost and lowers your taxable gain.

For example:

• You buy a property for £250,000 and pay £10,000 in stamp duty

• When calculating CGT, your base cost becomes £260,000

• If you later sell the property for £350,000, your taxable gain is £90,000 rather than £100,000

It is important to keep clear records of all purchase-related costs to support this calculation.

Companies Buying Property

If a limited company purchases property for business or investment purposes, the tax treatment is slightly different.

Stamp duty still applies and must be paid to HMRC within 14 days of completion, but:

• It cannot be deducted from Corporation Tax profits in the year it is paid

• It may reduce Corporation Tax liability in the future when the property is sold

• It becomes part of the company’s capital base for Capital Gains Tax (or Corporation Tax on chargeable gains)

Like individual landlords, companies can add SDLT to the cost of acquisition when calculating the gain or loss on disposal.

For companies trading in property (such as developers or dealers), the treatment may vary. In some cases, acquisition costs may be considered part of stock or trading activity, which could lead to different tax consequences. Specialist advice is needed for those scenarios.

Mixed Use and Commercial Properties

Stamp duty also applies to commercial property and mixed-use transactions. The tax rates and thresholds are different, but the basic principles remain the same.

Whether the property is bought by an individual or a company:

• The SDLT is a capital cost

• It is not deductible from income

• It increases the acquisition cost for CGT or Corporation Tax when the asset is disposed of

Businesses that buy premises for their own occupation (such as shops, warehouses, or offices) must treat the stamp duty in the same way. It is not an allowable expense against trading profits but will form part of the capital value of the asset.

Stamp Duty and CGT Relief

The clearest tax advantage of stamp duty is its role in reducing Capital Gains Tax. For both individuals and companies, the following costs may be included when calculating the gain on disposal:

• Purchase price of the property

• SDLT paid at purchase

• Legal and conveyancing fees

• Estate agent fees when selling

• Certain capital improvements (e.g. extensions)

This allows you to reduce the gain subject to tax and lowers your potential tax bill. However, stamp duty cannot be deducted if you gift the property or transfer it at undervalue unless CGT applies to the transaction.

Stamp Duty on Inherited or Gifted Properties

If you inherit a property, no stamp duty is payable. The tax is only charged on transactions involving a purchase or exchange for money or value.

If you are gifted a property and take on a mortgage as part of the transaction, stamp duty may still apply on the value of the mortgage assumed. Again, the SDLT paid in these circumstances is treated as a capital cost and may reduce CGT on eventual sale, but cannot be deducted from income.

Keeping Records for CGT

To ensure that you can claim the correct relief when selling a property, you must retain:

• The SDLT return or confirmation of payment

• Completion statement from your solicitor

• Proof of other purchase costs such as legal fees, mortgage arrangement fees, or surveys

• Receipts for any qualifying capital improvements

These records should be kept for at least five years after the 31 January filing deadline of the tax year in which the property is sold. If you sell a property where CGT applies, you must report and pay the tax within 60 days of completion.

Conclusion

Stamp duty is not tax deductible against your income or profits in the UK. Whether you are a homeowner, a landlord, or a company, SDLT is treated as a capital cost rather than an allowable expense. However, it does reduce your liability for Capital Gains Tax when you sell the property, provided the transaction is taxable.

For property investors and companies, understanding how SDLT interacts with other tax rules is crucial for long-term planning. Although there is no upfront relief, the ability to offset stamp duty against a future gain can still provide a meaningful reduction in tax over time.

Always retain full records of your purchase costs, and speak to a tax adviser if you are unsure how stamp duty affects your investment or business decisions.