Care Home Stamp Duty
How stamp duty applies to care homes, nursing homes, and residential care facilities. Care homes are non-residential (C2 use class) for SDLT and pay lower commercial rates. No additional dwelling surcharge applies, and going concern purchases can reduce the taxable consideration further.
Key Takeaways
- Care homes are non-residential for SDLT because FA 2003 s116(3)(c) says a home providing residential accommodation with personal care is not used as a dwelling. The C2 planning use class is an indicator, not the test
- Non-residential rates apply: 0% up to £150,000, 2% from £150,001 to £250,000, 5% above £250,000
- The 5% additional dwelling surcharge does NOT apply to care home purchases, as they are not dwellings
- Once conversion work into flats or houses has physically started, the building is being adapted for use as dwellings and is residential property
- Nursing homes, residential care homes and dementia care homes providing personal care are non-residential. Sheltered or extra-care housing made up of self-contained flats needs checking, as each flat may be a dwelling
- In a going concern purchase, genuine chattels and stock can be excluded. Goodwill reflecting the home's trading potential is part of the property value (HMRC v Denning [2022] EWCA Civ 909, itself a care home case), and fixtures are part of the land
Care Homes as Non-Residential Property
Care homes are non-residential property for SDLT purposes. This is a settled classification with little ambiguity. A care home (nursing home, residential care facility, dementia care unit) is an institution providing care services, not an individual dwelling. Use our stamp duty calculator to estimate SDLT on a care home purchase, and see our commercial stamp duty calculator for the full non-residential rate context.
The non-residential classification reflects the institutional nature of care homes:
- Residents do not own or rent the property as their private dwelling
- The building is operated as a regulated care business (CQC-registered in England)
- The property is used for delivering care services, not residential occupation
- FA 2003 s116(3)(c) says a building used as a home or other institution providing residential accommodation with personal care, for people who need it because of old age, disablement, dependence or mental disorder, is not used as a dwelling
Non-residential = lower SDLT than equivalent residential value
A care home purchased for £500,000 pays £14,500 in SDLT at non-residential rates. The same £500,000 at residential rates would cost £15,000. For larger care home purchases above £1m, non-residential rates (max 5%) are significantly cheaper than residential rates (which can reach 10-12%).
C2 Use Class and SDLT
The Town and Country Planning (Use Classes) Order 1987 classifies properties by their use. For SDLT, the planning use class is an important, though not determinative, indicator of whether a property is residential or non-residential.
| Use Class | Description | SDLT Treatment |
|---|---|---|
| C2 | Residential institutions: care homes, hospitals, nursing homes (boarding school accommodation is the exception: s116(2)(a) treats it as a dwelling) | Non-residential |
| C2A | Secure residential institutions: secure hospitals, prisons, young offender institutions | Non-residential |
| C3 | Dwelling houses: private residences, families, small household groups | Residential |
A building used as a care home is non-residential, and while it is used that way its suitability for any other use is ignored (s116(4)). The use at the date of purchase is what matters, not the planning class or what the building could be converted to. Once work adapting it into flats or houses is physically under way, it is in the process of being adapted for use as dwellings and is residential.
Non-Residential Rate Bands
Care homes pay SDLT at non-residential rates. Below are the current rates, as at August 2026, with worked examples at care home purchase prices.
| Purchase Price Band | SDLT Rate |
|---|---|
| Up to £150,000 | 0% |
| £150,001 to £250,000 | 2% |
| Above £250,000 | 5% |
Worked examples at care home purchase prices
Small residential care home at £500,000
0% on first £150,000 = £0
2% on next £100,000 (£150k to £250k) = £2,000
5% on remaining £250,000 (£250k to £500k) = £12,500
Total SDLT: £14,500
(Residential equivalent at £500k: £15,000, but no surcharge risk at non-residential)
Medium nursing home at £1,000,000
0% on first £150,000 = £0
2% on next £100,000 (£150k to £250k) = £2,000
5% on remaining £750,000 (£250k to £1m) = £37,500
Total SDLT: £39,500
(Residential equivalent at £1m: £43,750 standard + 5% surcharge = £93,750 if additional property)
Large dementia care facility at £2,000,000
0% on first £150,000 = £0
2% on next £100,000 (£150k to £250k) = £2,000
5% on remaining £1,750,000 (£250k to £2m) = £87,500
Total SDLT: £89,500
(Residential equivalent at £2m: £153,750, so non-residential saves £64,250)
Types of Care Homes and Classification
All of the following qualify as non-residential (C2 use class) for SDLT purposes:
Nursing homes
Registered nursing homes providing 24-hour nursing care. CQC-regulated. Non-residential regardless of size.
Residential care homes
Personal care homes for elderly or disabled residents without 24-hour nursing. CQC-registered. Non-residential.
Dementia care facilities
Specialist dementia care units, memory care homes. Non-residential as C2 institutional use.
Sheltered housing with care (C2)
Communal sheltered housing with on-site care staff and manager. Where the operator provides personal care as part of the service, C2 classification applies and the purchase is non-residential.
Retirement housing (C3): residential, not non-residential
Retirement housing that is simply age-restricted private accommodation, where residents purchase or rent their flat and no care services are provided, is C3 (dwelling houses) and is residential for SDLT. The distinction:
- C2 (non-residential): communal facilities, on-site care staff, managed service, residents do not own individual units outright
- C3 (residential): age-restricted but otherwise private apartments, no care services, individual ownership or AST tenancies
Taking a new lease? You pay stamp duty on the rent too
Lease stamp duty is worked out from the rent over the whole term. A specialist checks the figure before you sign.
Converting Care Homes to Residential
Converting a care home to private residential dwellings (flats or houses) is a popular development strategy. The SDLT implications change at each stage:
Stage 1: Purchasing the care home (pre-conversion)
If the building is in use as a care home when you buy it, non-residential SDLT rates apply and there is no additional dwelling surcharge. Planning permission for residential conversion does not change this on its own. But if conversion work has physically started before completion, the building is in the process of being adapted for use as dwellings and residential rates apply (HMRC manual SDLTM00400). A closed, empty care home is judged on what it is most suitable for (s116(5)), so take advice.
Stage 2: During conversion works
No SDLT event occurs during construction. The conversion contract with the builder is not a land transaction. SDLT was paid at purchase and no further SDLT is due unless a new land transaction occurs (e.g., acquiring additional land).
Stage 3: Selling converted flats (post-conversion)
Once the care home has been converted to C3 residential flats, each flat sale is a residential transaction for the buyer. The buyer pays residential SDLT rates (and potentially the additional dwelling surcharge if they own other property). VAT on construction may also apply, as conversion of non-residential to residential attracts 5% reduced VAT rate, a significant saving.
Scotland and Wales Equivalents
Scotland: LBTT
LBTT applies non-residential rates to care homes under the same C2 classification principle. Non-residential rates: 0% up to £150,000, 1% to £250,000, 5% above. Scotland's Additional Dwelling Supplement (ADS) does not apply to non-residential purchases. CQC equivalent: Care Inspectorate (Scotland).
Wales: LTT
Wales LTT applies non-residential rates to care homes. Rates: 0% up to £225,000, 1% from £225,001 to £250,000, 5% from £250,001 to £1,000,000, 6% above £1,000,000. The higher nil-rate threshold makes Wales LTT more advantageous for smaller care home purchases than England SDLT. CIW (Care Inspectorate Wales) regulates Welsh care homes.
Investment and Planning Considerations
Going concern purchases
When a care home is purchased as a going concern (the business continues operating under new ownership), certain elements may be excluded from SDLT-chargeable consideration:
- Goodwill: Only goodwill that is genuinely separate from the property. In HMRC v Denning [2022] EWCA Civ 909, a care home case, the Court of Appeal held that "transferable goodwill" reflected in a trading-potential valuation is part of the value of the property itself
- Moveable equipment: Beds, furniture, and medical equipment, which are chattels not subject to SDLT
- Trade stock: Medications and supplies, which are not land
- The land and buildings: SDLT is charged only on this element
Proper apportionment between property and business elements can meaningfully reduce the SDLT base. HMRC scrutinises excessive apportionments, so all valuations should be independently supported.
Company purchases: no 17% SDLT rate
Dwellings costing more than £500,000 bought by companies can attract the flat 17% SDLT rate (from 31 October 2024), unless a relief applies, such as for a property rental business. Care homes are non-residential, so this elevated corporate rate does not apply. A care home purchase through a company pays standard non-residential rates regardless of value.
CQC registration and completion timing
The CQC registration of a care home transfers separately from the property purchase. Ensure your solicitor coordinates the SDLT return (due within 14 days of completion) with the CQC registration process. Delays in CQC transfer do not affect the SDLT deadline.
Specialist advice for care home transactions
Care home purchases are complex transactions combining property law, healthcare regulation (CQC), business sale law, and SDLT. Always engage a solicitor with specialist care sector experience and a tax adviser to ensure correct SDLT treatment and optimum apportionment of consideration.
Reviewed by
Julie White
ACAStamp duty specialist since 1999Stamp Duty Land Tax Specialist
ACA and Tax Adviser with a career spanning nearly four decades, specialising in stamp duty planning and advisory work since 1999.