In the UK, there are several tax benefits and reliefs that can make home ownership financially advantageous. We’ve put together the main tax-related benefits and rules for homeowners.
1. Stamp Duty Land Tax Relief
First time buyers
Stamp Duty Land Tax (SDLT)* is the tax you pay when you buy a property. First-time buyers benefit from reduced or zero SDLT on their first home:
- 0% on the first £300,000 of the purchase price
- 5% on the portion between £300,001 and £500,000
- Above £500,000 normal rates apply with no relief
Non-first-time buyers
For non-first-time buyers, SDLT starts at 0% up to £125,000, then increases with bands up to 12% on higher values. If the purchase price is above £500,000, no relief is available and normal rates apply as detailed below.
The current SDLT Rates (England & NI) for most buyers’ main residence
| Portion of price | SDLT Rate |
| Up to £125,000 | 0% |
| £125,001–£250,000 | 2% |
| £250,001–£925,000 | 5% |
| £925,001–£1,500,000 | 10% |
| Above £1,500,000 | 12% |
Buying an additional property (second home or buy-to-let) usually incurs an extra 3% surcharge. This relief can mean savings of thousands of pounds when entering the property market for the first time.
2. Capital Gains Tax exemption on your main home
If you sell your main residence, you won’t usually pay Capital Gains Tax (CGT) on any increase in value thanks to Principal Private Residence Relief. This relief generally applies when the home has been your only or main residence. This is one of the biggest tax advantages – you keep more of the profit when you sell, compared with selling an investment property where CGT would normally be due.
Note: Married couples and civil partners can only count one property as their main home at any one time.
3. Tax-Free income for taking a lodger
If you let out a furnished room in your home, you can earn up to £7,500 per year tax-free under the ‘Rent a Room Scheme’ (shared between owners if co-owned). This lets you generate extra income without paying Income Tax on it (within the allowance). The limit is the same even if you let accommodation for less than 12 months. If your property is mortgaged, you would need to make your lender aware.
4. Inheritance Tax planning opportunities
Your home is part of your estate for Inheritance Tax (IHT), but there are special allowances.
If someone dies on or after 6 April 2017 and they owned their own home, or share of one, their estate may be entitled to an additional threshold. This is the residence nil rate band (RNRB). The RNRB can increase the amount passed on tax-free if you leave your home to direct dependents, for example, children or grandchildren.
The extra amount for 2021 to 2026 is up to £175,000, or the value of the property – whichever is the lower amount – subject to the estate being below £2 million. Where the estate is greater than £2 million, the RNRB is reduced by £1 for every £2 the estate exceeds this £2 million threshold.
If the person who died did not use their residence nil rate band, the unused threshold can be transferred to a surviving spouse or civil partner.
In summary
- Benefit applies to main home
- Reduced/zero SDLT for first-time buyers
- Principal Private Residence Relief (no CGT on sale)
- ‘Rent a Room’ offers the opportunity of tax-free income
- Inheritance Tax allowances on home
Our Mortgage Manager, Lorna, would be delighted to help with any questions you have regarding obtaining a mortgage. Just get in touch if you’d like to know more about this, and the tax advantages that could be available to you.
* SDLT is known as Land and Buildings Transaction Tax in Scotland, Land Transaction Tax in Wales
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
Your home or other property may be repossessed if you don’t keep up payments on your mortgage.
Sources
sdltcalcalculator.uk
gov.uk
SJP Approved 07/04/2026