Glossary · UK
What is Buyer's Premium (Property Auction)?
An additional fee charged by a property auction house directly to the buyer, typically 3-5% of the hammer price plus VAT, payable on top of the hammer price when purchasing at auction.
Full Definition
At property auctions -- both traditional and modern method -- it is standard practice for the auction house to charge a buyer's premium in addition to the hammer price. This fee compensates the auctioneer for organising and marketing the sale and is payable by the buyer, not the seller. Buyer's premiums typically range from 3% to 5% of the hammer price, plus VAT at 20%, meaning the true cost to the buyer can be materially higher than the price bid. For example, a property hammered at £200,000 with a 4% premium attracts a premium of £8,000 plus VAT of £1,600, bringing the total to £209,600 before legal fees and survey costs. At traditional auctions, contracts are exchanged on the fall of the hammer and completion usually follows within 28 days. The buyer's premium, deposit (typically 10%), and any reservation fee are payable immediately or very shortly after the auction. At modern method auctions (often conducted online), the buyer pays a non-refundable reservation fee upfront, which may or may not count toward the purchase price or be in addition to a buyer's premium. For Stamp Duty Land Tax (SDLT) purposes, the taxable consideration includes any amount paid that forms part of the consideration for the property. Whether the buyer's premium falls within SDLT consideration depends on its precise legal nature -- if it is paid directly to the auctioneer as a service charge and not to the seller, it is generally outside SDLT consideration. However, buyers should confirm this with their solicitor, particularly for higher-value lots. All auction costs -- including the premium -- should be factored into pre-auction financial planning, as failing to complete after exchange can result in loss of the deposit.