Stamp duty on a British home, and what it does on your US return

Stamp duty land tax, or SDLT, is the tax you pay when you buy property or land in England or Northern Ireland. Scotland and Wales run their own versions with different names and rates. The buyer pays it, usually through the conveyancer at completion.

It is a tax on the purchase itself. You pay it once, rather than every year you own the home.

The amount depends on the price, on who is buying, and on what else the buyer already owns. That last point is where American buyers often get caught.

SDLT uses bands, much like income tax. Each rate applies only to the part of the price that falls within its band, rather than to the whole price. So a higher price does not push the entire purchase into a higher rate.

The GOV.UK rates page sets out the current bands for a standard residential purchase. The table below reflects that page at the time of writing.

Rates change, sometimes at short notice in a Budget. So check the current figures before relying on any estimate, including this one.

Only if they have never owned a home anywhere in the world. HMRC guidance on who counts as a first-time buyer looks at property worldwide, not just in Britain. So a house you once owned in Ohio rules you out.

Everyone buying with you must qualify as well. If your partner owned a flat before, the relief is not available to either of you.

Where the relief does apply, it removes SDLT on the cheaper part of the price and reduces it on the rest. It stops applying entirely above a set price.

It can. The higher rates for additional properties apply if the new home will not be the only residential property you own, worth more than a small threshold, anywhere in the world. A house you kept in America counts.

There is an important exception for replacing your main home. If the new home replaces your previous main residence, and you sold that home first, the higher rates do not apply.

If you sell the old main home later, within three years, you can usually claim a refund of the extra SDLT. HMRC guidance on buying an additional residential property sets out the conditions.

An extra surcharge applies to buyers who were not present in the UK for at least 183 days in the 12 months before the purchase. It catches Americans who buy before they move, or who have only just arrived.

This test is about physical presence, not nationality. An American who has lived here for years pays exactly what a British resident pays.

The surcharge can come back. If you then spend enough time in the UK within the allowed window, you can claim a repayment, and HMRC guidance on repaying the non-resident surcharge explains how and by when.

Timing an arrival and a purchase together therefore deserves a little planning. Buying soon after you land usually means paying the surcharge first and claiming it back later, so budget for the cash in the meantime.

The buyers are jointly responsible for the tax, whatever their shares in the property. In practice the conveyancer collects it from the purchase funds, so the question rarely arises at completion.

It matters more on the American return. Only your share of the cost belongs in your basis, so the ownership split decides how much of the tax you record.

Where one partner is not American, write the split down at purchase. It saves a reconstruction years later, when memories of who paid what have faded.

No, not as a deduction in the year you pay it. SDLT is a tax on the transfer, not an annual property tax. Foreign real property taxes are not deductible for individuals either, so neither route gives relief that year.

That does not mean the cost disappears. It stays with the property and changes the numbers later.

In our practice we see people search for a deduction that does not exist, while losing track of the treatment that does help them.

It adds to the cost of the property. The IRS guide to basis lists transfer taxes among the settlement costs you include when you buy. SDLT is a transfer tax in that sense.

A higher basis means a smaller gain when you sell. So the SDLT you paid at purchase quietly reduces the American tax on the eventual sale.

Record it in dollars. Convert the amount at the exchange rate on the purchase date, alongside the price itself.

Then SDLT works harder on the American side. The cost of a let property, including SDLT, is split between land and building. The building share is depreciated over the recovery period for residential property.

So part of the SDLT comes back as depreciation deductions each year. The rest waits in the land share until you sell.

On the British side, SDLT is part of the acquisition cost for capital gains, rather than a letting expense. Our guide to UK rental income on a US return covers the annual reporting.

For a main home, Private Residence Relief usually removes the British gain entirely. So SDLT rarely matters in Britain when you sell a home you lived in throughout, and the American side is where it earns its keep.

For a property you let, or one that was not always your main home, SDLT counts as part of what you paid. It reduces the chargeable gain in the same way it does in America.

Our guide to selling a UK home as a US person covers both calculations on a sale.

Yes, in most cases, though the calculation can differ. Leasehold purchases carry the tax on the price, and new long leases can bring an extra element based on rent. Shared ownership has its own options.

These are specialist areas, and the conveyancer usually handles the figures. The American treatment stays simple, because whatever you pay on the purchase still adds to your basis.

Keep the conveyancer's calculation with your records. It shows exactly what you paid and why, which is the evidence both returns may need.

Scotland charges Land and Buildings Transaction Tax, and Wales charges Land Transaction Tax. Their bands, reliefs and surcharges differ from SDLT in England.

The American treatment does not change with the name. Each is a transfer tax on the purchase, so each adds to your basis in the same way.

Check the relevant rules before you buy, particularly around surcharges for additional homes. The worldwide ownership point matters in each system.

HMRC can correct it and collect any shortfall, with interest and possibly penalties. The most common error for Americans is a relief or a rate that the worldwide ownership rules did not allow.

You can amend a return within a set period if you spot the mistake yourself. That route is cheaper than waiting for HMRC to find it.

Any change also changes your American basis. So update your US records whenever the final figure moves, including after a refund.

This list covers both the British payment and the American record. Most of it takes minutes if you do it at completion.

Keep the SDLT return with your permanent property file.

Take an illustrative example: an American couple move to Manchester and buy a family home. They still own the house they lived in near Chicago, and they plan to sell it next year.

Because they own the Chicago house, they pay the higher rates on completion. They sell it within the allowed period and claim a refund of the extra SDLT.

On their US return, the SDLT they finally paid goes into the basis of the Manchester home. Years later, it trims the dollar gain when they sell.

Their neighbours, renting while they wait to sell in Chicago, avoid the higher rates entirely by selling first. Both routes end in the same place, but the cash flow differs by a large sum for a year or more.

The first is claiming first-time buyer relief after owning a home in America. The worldwide test rules it out, and correcting the return later costs more than getting it right.

The second is missing a refund. Both the additional property refund and the non-resident surcharge repayment have time limits.

The third is leaving SDLT out of the US basis. It is one of the largest purchase costs, so forgetting it overstates the eventual American gain.

We review purchases through our property and capital gains service, including SDLT surcharges and the American basis records. Where a refund is available, we make sure the deadline is in the diary. If letting the property brings you into the system, our UK Self Assessment service covers the annual return.

If you are buying and still own property abroad, send us the details and we will check the position at a fixed fee agreed first. This article is general information, not personal tax advice; take advice on your own facts from a qualified adviser.