When a house builder takes your old home in part exchange for a new one, the builder’s purchase of your old home can be exempt from Stamp Duty Land Tax under Schedule 6A to the Finance Act 2003. You, as buyer of the new home, get no relief: you pay SDLT on the full value of the new home, not just the cash you top up.

What does part exchange relief actually cover?

A part exchange involves two transactions: the individual buys a new home from the developer, and the developer, or a company working with it, buys the individual’s existing home. Without relief both would be taxed, and because the developer is a company, its purchase of the old home would usually attract the 5% higher rates for companies under Schedule 4ZA paragraph 4.

Section 58A and Schedule 6A provide relief only for the second leg, the acquisition of the old home. Paragraph 1 exempts it where the buyer is a house building company. Paragraph 2 gives a similar exemption where a property trader buys the old home as part of the arrangement. HMRC’s manual at SDLTM21010 summarises both, and confirms that the purchase of the individual’s former home is exempt if all the conditions are met.

What conditions apply when the house builder takes the old home?

Under Schedule 6A paragraph 1(2), the house building company’s acquisition of the old home is exempt if:

  • the individual, alone or with other individuals, acquires a new dwelling from the house building company;
  • the individual occupied the old home as their only or main residence at some time in the two years ending with its sale;
  • the individual intends to occupy the new dwelling as their only or main residence;
  • each acquisition is entered into in consideration of the other; and
  • the area acquired by the company does not exceed the permitted area.

A house building company is a company carrying on the business of constructing or adapting buildings for use as dwellings, and the definition extends to any company connected with it (paragraph 1(4)). A new dwelling is one constructed for use as a single dwelling that has not previously been occupied, or one adapted for use as a single dwelling and not occupied since (paragraph 7(2)).

SDLTM21010 notes that the people selling and buying need not be identical, so a couple can sell a home owned by one of them and buy the new home together. There is no definition of only or main residence; it is a question of fact.

What if a property trader buys the old home instead?

Developers often pass part exchanges to a separate dealer. Paragraph 2 exempts the acquisition by a property trader if it is made in the course of a business that includes buying homes from people who are buying new homes from house builders, and the same occupation and permitted area conditions are met. A property trader must be a company, a limited liability partnership or a partnership made up entirely of companies or LLPs (paragraph 8). SDLTM21010 confirms that sole traders and individuals in partnership cannot claim.

The trader must not intend to:

  • spend more than the permitted amount on refurbishment, which is the greater of £10,000 and 5% of the price, subject to a maximum of £20,000 (paragraph 9);
  • grant a lease or licence of the old home, other than to the individual for no more than six months; or
  • let any of its directors, members or employees, or people connected with them, live there.

Cleaning and work solely to meet minimum safety standards are not refurbishment. If the trader later does any of these things, paragraph 11 withdraws the relief and the tax that would have been due without it becomes payable.

Schedule 6A contains similar reliefs for property traders buying from personal representatives, for traders buying where a chain has broken down, and for employers or traders buying an employee’s home on a relocation.

What happens if the old home has a large garden?

The permitted area is the garden or grounds up to 0.5 hectare including the site of the house, or a larger area needed for the reasonable enjoyment of the house given its size and character (paragraph 7(3)). SDLTM21010 says stables and a paddock would not normally be needed for reasonable enjoyment.

If the old home comes with more than this, relief is partial. The chargeable consideration becomes the market value of the whole old home less the market value of the permitted area, so the builder pays tax only on the excess.

How is the buyer of the new home charged?

The individual’s purchase of the new home gets no relief from Schedule 6A. Because the buyer gives property, their old home, as part of the price, the exchange rules in Schedule 4 paragraph 5 apply. Where a major interest is involved, the chargeable consideration for each acquisition is the greater of the market value of what is acquired and the consideration actually given. For the buyer this is the cash paid plus the value of the old home, and in a normal arm’s length deal it equals the full price of the new home.

The normal rates then apply. On the 5% surcharge, the old home passes to the developer on the same day, so the buyer will not still own it at the end of the day of completion. GOV.UK confirms the higher rates do not apply to someone who will use the new property as their main home and has sold their last main home before, or on the same day as, the purchase. A buyer who owns other residential property, such as a buy to let, still needs to consider the surcharge.

How does this work in practice?

Illustration only. Alex buys a new build house priced at £450,000 in 2026 to 2027. The builder’s company takes Alex’s current home, where Alex has always lived, at its £300,000 market value, and Alex pays £150,000 in cash.

Transaction Chargeable consideration SDLT
Alex buys new home £450,000 (cash £150,000 plus old home £300,000) £12,500
Builder buys old home, relief claimed £300,000, exempt £0
Builder buys old home, no relief £300,000 at company higher rates £20,000

Alex’s tax is 2% on £125,000 plus 5% on £200,000. Without the relief the builder would pay 5% on £125,000, 7% on £125,000 and 10% on £50,000.

How is the relief claimed?

A return must be filed to claim any relief, even where no tax is due, and returns are due within 14 days of completion. SDLTM21020 says relief under paragraph 1 is claimed with relief code 08 on the return. Where only partial relief is available because of the permitted area, the return should claim the partial relief and show the tax on the excess.

What mistakes are common?

  • Buyers thinking they pay tax only on the cash. The exchange rules tax the full value of the new home.
  • Using an unconnected dealer that does not qualify. An individual or ordinary partnership buying part exchanges cannot claim paragraph 2 relief.
  • Old home not occupied in the last two years. A former home that has been let out for longer than that fails the condition.
  • Refurbishing or letting too soon. A trader who spends over the permitted amount or lets the property loses the relief retrospectively.
  • The new home is not new. A home that has already been occupied, such as a resale, is not a new dwelling, so the builder’s purchase of the old home does not qualify.

The general rules on non cash consideration are set out in what counts as consideration for SDLT. For the surcharge see SDLT higher rates for additional dwellings, and for a buyer whose old home sells after the new purchase, reclaiming the higher rates when replacing a main residence. Where builders and buyers complete in stages, substantial performance can fix an earlier effective date.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.