Redundancy and Buying Property

Stamp Duty Does Not Depend on Income

SDLT is a transaction tax on the property, calculated on the purchase price. Your income, employment status, savings, or source of funds are entirely irrelevant to the SDLT amount.

A person earning £100,000 and a person with zero income pay exactly the same stamp duty on the same property. HMRC does not ask about your employment situation when calculating SDLT — only the price, the property type, and your buyer status matter.

What does matter for your SDLT bill is whether you are a first-time buyer (which may qualify you for relief), whether you are buying an additional property (which triggers the 5% surcharge), or whether you are replacing your main residence. None of these depend on whether you are employed or recently made redundant.

For a full breakdown of how SDLT is calculated, see our guide on how stamp duty is calculated.

Using Redundancy Pay for Stamp Duty

The first £30,000 of statutory redundancy pay is tax-free — no income tax and no National Insurance. Any amount above £30,000 is taxed as income at your marginal rate.

Redundancy pay can be used for stamp duty, a deposit contribution, legal fees, survey costs, or any other purchase expense. There is no legal restriction on how redundancy pay is spent on a property transaction.

One practical consideration: ring-fence enough for SDLT before allocating funds to your deposit. Stamp duty must be paid to HMRC within 14 days of completion. If you have committed all available funds to the deposit and then face an unexpected SDLT bill, you could face penalties.

To model the total cost of your purchase including SDLT, legal fees, and survey costs, use our cost of buying calculator.

Mortgage Affordability After Redundancy

While redundancy does not affect your SDLT bill, it significantly affects your ability to obtain a mortgage. Lenders assess affordability based on sustainable income — typically your salary, pension, or demonstrable self-employment earnings. Redundancy pay is a lump-sum payment, not ongoing income, and no mainstream lender counts it as income for affordability purposes.

If you have already received a mortgage offer and then lose your job before completion, you are obliged to notify the lender. Failing to do so is misrepresentation. The lender may withdraw the offer if your income situation has materially changed.

Options if you have already been made redundant:

• Wait until you start a new role and build up 3 to 6 months of employment history — most standard lenders require this
• Use a specialist mortgage broker who works with lenders that assess each case individually
• Consider a cash purchase if your redundancy pay combined with savings makes this viable
• Explore guarantor or joint borrower arrangements with a family member who has demonstrable income

Timing Your Purchase

The timing of your purchase relative to redundancy has no effect on stamp duty, but it has a significant effect on your mortgage position. Three practical scenarios:

Adding Stamp Duty to Your Mortgage

Some lenders allow stamp duty to be added to the mortgage rather than paid upfront from your own funds. This means borrowing more than the property value — for example, borrowing £357,500 on a £350,000 property to cover a £7,500 SDLT bill.

Adding SDLT to the mortgage increases the loan amount, which requires higher affordability. After redundancy, with reduced or absent income, arranging a larger mortgage is harder. Lenders may decline the application altogether or only agree to lend the standard amount, leaving you to fund the SDLT from your own resources.

If this arrangement is approved, you spread the stamp duty cost over the full mortgage term but pay interest on it throughout. On a 25-year mortgage at 5%, adding £7,500 costs roughly £6,600 in additional interest over the term.

For a detailed look at how this works, see our guide on adding stamp duty to your mortgage.

Worked Example: £350k Property

The following SDLT calculations apply to a £350,000 property purchase. Each figure is identical whether the buyer earns £80,000 or has just been made redundant.

Use our first-time buyer calculator or second home calculator to calculate the exact SDLT for your purchase.

Settlement Agreements and Negotiated Exits

If you are in the process of negotiating an exit from your employer, the timing of your property purchase can be worth careful consideration. A settlement agreement may include enhanced redundancy pay above the £30,000 tax-free statutory threshold.

Some settlement agreements include a period of garden leave — where you remain technically employed while serving your notice but are not required to work. If your notice period or garden leave runs while a property purchase is progressing, you can complete the purchase while still employed. This gives you a stronger position with the mortgage lender, since you can demonstrate current employment at the point the lender carries out final checks.

Key points on settlement agreements and property purchases:

• Garden leave counts as employment — useful for mortgage applications during a negotiated exit
• Enhanced pay above £30,000 is subject to income tax, reducing the net amount available for stamp duty or deposit
• Timing a settlement payment to straddle two tax years can reduce income tax on the enhanced portion
• None of this affects SDLT — stamp duty is calculated solely on the property price and your buyer type

If you are dealing with both a settlement negotiation and a property transaction simultaneously, a financial adviser and a specialist mortgage broker can help you sequence the steps to best effect.