Affordability with Stamp Duty
Stamp duty does not reduce your mortgage offer — but it does reduce your deposit. See how SDLT affects your true buying power: maximum property price, LTV, and monthly payments across three realistic scenarios.
Last verified: March 2026
Key Takeaways
- SDLT must be paid from your own funds — paying it reduces your deposit by the same amount.
- A smaller deposit pushes up your LTV ratio, which typically results in a higher mortgage interest rate.
- First-time buyers pay zero SDLT on properties under £300,000 — a real affordability advantage.
- Additional property buyers face a 5% surcharge on top of standard rates, significantly eroding deposits.
- The iterative calculation shows your realistic maximum price once SDLT is accounted for.
In this article
How to Use This Tool
- Enter your gross annual income (and partner income for joint purchases)
- Enter your total savings (deposit + SDLT all comes from this)
- Select your buyer type (FTB, standard, or additional property)
- Adjust the income multiplier to match what lenders are offering you
- Enter the mortgage interest rate and term for monthly payment estimates
- Compare the three scenarios: naive, realistic (SDLT from savings), and SDLT on mortgage
Scenario 2 is the most realistic: most buyers pay SDLT from savings on completion day. This reduces the deposit, increasing LTV and potentially the mortgage rate.
Affordability Calculator
All funds available — deposit + SDLT comes from here
Most lenders: 4–4.5x
Naive
No SDLT considered
£265,000
max property
84.9% LTV · ≤85% LTV
£1,251/mo
Realistic
SDLT from savings
£261,905
max property
85.9% LTV · ≤90% LTV
£1,251/mo
SDLT on Mortgage
Borrow extra for SDLT
£265,000
max property
86.1% LTV · ≤90% LTV
£1,269/mo
| Metric | Naive | Realistic | SDLT on Mortgage |
|---|---|---|---|
| Max property price | £265,000 | £261,905 | £265,000 |
| SDLT on that price | £3,250 | £3,095 | £3,250 |
| Effective deposit | £40,000 | £36,905 | £40,000 |
| Deposit % | 15.1% | 14.1% | 15.1% |
| Mortgage amount | £225,000 | £225,000 | £228,250 |
| LTV ratio | 84.9% | 85.9% | 86.1% |
| Monthly payment (est.) | £1,251 | £1,251 | £1,269 |
Monthly payment is a repayment mortgage estimate only. Does not include buildings insurance, service charges, or rate changes. Consult a mortgage adviser for personalised advice.
Understanding Your Results
Scenario 1: Naive (no SDLT consideration)
This shows the maximum property price if you simply add your borrowing capacity to your full savings — ignoring that SDLT must be paid. It is the number most online tools show, but it overstates your buying power.
Scenario 2: Realistic (SDLT from savings)
This is the most accurate scenario for most buyers. Your savings cover both the deposit and SDLT. Because SDLT depends on the property price, and the property price depends on what's left after SDLT, this requires an iterative calculation — the tool solves this automatically.
The result is your true maximum property price. It is typically lower than the naive figure by the SDLT amount, plus a small additional reduction as the lower price attracts slightly less SDLT, which in turn affects the convergence.
Scenario 3: SDLT added to mortgage
Some lenders allow you to add SDLT to your mortgage, effectively borrowing more to cover the tax. This keeps your full savings as deposit but increases your LTV. If this takes your LTV above 90% or 95%, you may face fewer lender options and higher rates.
LTV tiers matter: many lenders price in bands at 60%, 75%, 80%, 85%, 90%, and 95%. Crossing a boundary (e.g., from 89% to 91%) can add 0.3%–0.6% to your rate — costing thousands over the mortgage term.
Lender Income Multipliers
Lenders cap mortgage borrowing as a multiple of your gross annual income. The standard range is 4–4.5x, but higher multiples are available in specific circumstances:
| Multiplier | Typical Availability |
|---|---|
| 3–3.5x | Conservative lenders, complex income, high debt-to-income |
| 4–4.5x | Standard offer from most high street lenders |
| 5–5.5x | High earners (typically £75k+), some professionals, Help to Buy |
| 6x | Specialist/private banking, very high earners, low LTV |
Self-employed borrowers are typically assessed on 2–3 year average net profit. Joint applications use combined gross income. Affordability stress tests (typically at 6.5–8%) may further limit borrowing even where income multiples suggest more.
How SDLT Erodes Your Deposit
The deposit erosion effect is most damaging when it pushes you across an LTV boundary. Consider these scenarios with £50,000 savings:
FTB buying at £280,000 — No SDLT impact
SDLT: £0. Full £50,000 remains as deposit = 17.9% deposit. LTV: 82.1%. Good mortgage rates available.
Standard buyer at £400,000
SDLT: £7,500. Deposit reduced to £42,500 = 10.6% of £400,000. LTV: 89.4%. Closer to 90% tier, higher rates.
Additional property buyer at £400,000
SDLT: £27,500 (with 5% surcharge). Deposit reduced to £22,500 = just 5.6% of £400,000. LTV: 94.4%. Near 95% ceiling, limited lenders.
The additional property surcharge is particularly damaging. A buyer with £50,000 savings targeting a £400,000 investment property could find that after SDLT their effective deposit is under 6% — potentially making the purchase non-viable without additional funds.
Worked Examples
Example 1: Solo FTB — SDLT does not apply
Income: £45,000 | Savings: £25,000 | Buyer type: FTB | Multiplier: 4.5x
Max borrowing: £202,500 | Naive max price: £227,500
SDLT (FTB, under £300k): £0 | Adjusted max price: £227,500 (no change)
Result: FTB relief means zero impact. Full savings available as deposit.
Example 2: Joint standard buyers
Income: £80,000 combined | Savings: £60,000 | Buyer type: Standard | Multiplier: 4.5x
Max borrowing: £360,000 | Naive max price: £420,000 | SDLT at £420k: £8,500
Realistic max price: ~£411,500 (iterative) | SDLT: ~£8,075 | Deposit: ~£51,925
SDLT reduces buying power by ~£8,500. LTV moves from 85.7% to 87.4%.
Example 3: Additional property buyer
Income: £100,000 | Savings: £80,000 | Buyer type: Additional (+5%) | Multiplier: 4.5x
Max borrowing: £450,000 | Naive max price: £530,000 | SDLT at £530k (with 5%): ~£53,000
Realistic max price: ~£477,000 (iterative) | SDLT: ~£45,850 | Deposit: ~£34,150 (7.2%)
SDLT erodes £45,850 from savings. Deposit drops from 15.1% to 7.2% — near 95% LTV ceiling.
Frequently Asked Questions
Does stamp duty reduce how much I can borrow?
Stamp duty does not directly reduce your mortgage offer — lenders base borrowing on income multiples. However, SDLT reduces your available deposit, pushing up your LTV ratio. A higher LTV may mean a worse mortgage rate, indirectly reducing affordability.
What income multiplier should I use?
Most high street lenders offer 4–4.5x gross income. Some specialist lenders offer up to 5.5x for high earners or professionals. Use 4.5x as a reasonable default for planning purposes.
Can I add stamp duty to my mortgage?
Some lenders allow it, but this increases your LTV and may push you into a higher rate tier. Adding SDLT to a 90% LTV mortgage could take you to 93%+ — still under 95% but at a worse rate. This tool shows the comparison across all three scenarios.
How does being a first-time buyer help my affordability?
FTB relief means zero SDLT on properties up to £300,000. On a £280,000 purchase, this saves £2,500 compared to standard buyers — money that stays in your deposit, keeping your LTV lower and your mortgage rate better.
Should I use gross or net income for the multiplier?
Always use gross (before tax) annual income. Lenders calculate affordability based on gross income. The tool applies the multiplier to your gross figure as stated.
Emma Richardson, MRICS
Chartered Surveyor & Property Tax Specialist
Emma Richardson is a RICS-qualified Chartered Surveyor with over 12 years of experience in UK property taxation. She founded Stamp Duty Calculator to help buyers understand the complex world of property transaction taxes.