Everything you need to know about Stamp Duty
You’ll most likely have to pay Stamp Duty Land Tax when you buy a new home. We’re here to cover how Stamp Duty works, when it applies, how much you’ll have to pay, and how you can pay it. It’s pretty simple stuff, really.
Just to let you know – the following article relates to how stamp duty land tax affects individuals only. It does not apply to those hoping to purchase properties through companies.
What is stamp duty?
Stamp Duty Land Tax (SDLT) is a tax on property or land purchases, with varying rates based on the property’s value. It’s due when you buy property, with higher rates applied to more expensive properties.
- Rates and Thresholds: SDLT rates are tiered, meaning only the portion of the property price above each threshold is taxed at the next rate.
- First-Time Buyers: Relief is available, often reducing SDLT if you’re purchasing your first home within certain value limits.
- Additional Properties: A surcharge applies if you’re buying a second property, like a buy-to-let or holiday home, typically adding 3% to each rate.
- Residency Surcharges: Non-residents face an additional 2% SDLT.
- Payment: SDLT payment is due within 14 days of the purchase’s completion, and a solicitor usually handles this on your behalf.
When does stamp duty apply?
Stamp Duty Land Tax (SDLT) is charged based on the property’s purchase price, with some general exemptions:
- Properties Below £250,000: For residential properties purchased for £250,000 or less, no SDLT is due.
- First-Time Buyers: If you’re a first-time buyer (including any co-buyers), you won’t pay SDLT on properties valued up to £425,000.
There we have it! If you fall within these two categories, then under the current stamp duty rules, you won’t have to pay a penny. If you fall outside these categories, then unfortunately you’ll have to pay stamp duty.
How much stamp duty will you pay?
The amount of Stamp Duty Land Tax (SDLT) you’ll pay depends on the property’s price and a few other factors:
Property Price Bands: SDLT is charged in bands, with different rates applying to portions of the price. For most buyers, rates range from 0% to 12%.
Additional Property Owners: If you already own a residential property, an extra 3% is added to each band.
Non-Residents: Non-UK residents pay an extra 2% on each band.
These bands mean you only pay higher rates on portions of the property price that exceed each threshold, with maximum rates reaching 15% in some cases.
What are the rates for stamp duty?
Price Band | Main Property Rate | Additional Property Rate | Description |
---|---|---|---|
Up to £250,000 | 0% | 3% | No SDLT on main property up to £250,000. |
£250,001 to £925,000 | 5% | 8% | 5% (or 8%) SDLT on this portion of the price. |
£925,001 to £1.5 million | 10% | 13% | 10% (or 13%) SDLT on this portion of the price. |
Over £1.5 million | 12% | 15% | 12% (or 15%) SDLT on any portion above £1.5 million. |
You might find yourself having to pay additional stamp duty, if you fall within the following categories:
- If you already own a residential property, and you’re buying an additional property, the additional property will be taxed in a higher rate.
- If you’re a non-UK resident, you’ll have to pay an additional 2% on top of existing stamp duty rates.
If you’d like to work out how much stamp duty you’ll have to pay, use our stamp duty calculator.
Impact of Recent Policy Changes on Stamp Duty
Recent changes to stamp duty policies have significantly impacted different categories of buyers.
For instance, first-time buyers may now benefit from increased thresholds, reducing or eliminating their stamp duty burden for properties under a certain value.
Meanwhile, changes in rates for second homes or buy-to-let properties have resulted in higher surcharges, discouraging speculative purchases. It’s important to stay updated on these changes as they can affect both short-term costs and long-term investment strategies.
Buyers should also consult experts to understand how these changes apply to their situation.
How do you pay stamp duty?
Your solicitor or conveyancer will usually handle your Stamp Duty Land Tax (SDLT) return and payment as part of the property transaction. You can choose to pay the fee upfront or have it added to their overall charges, depending on what you agree.
If you’d rather manage the payment yourself, you can file an SDLT return and pay the tax online through the government’s portal. However, most buyers find it convenient to have their solicitor manage this process.
You can pay for stamp duty land tax here.
When do you have to pay stamp duty?
Once you complete the purchase of your new property, you have 14 days to send a stamp duty land tax return to HMRC.
That’s about it really! We’ve covered a few more questions that you might have below.
If you’d like to talk to a mortgage adviser, no matter what your question might be, we’re always here to help. You can get in touch with us here.
With regards to advice on stamp duty land tax, we recommend that you seek independent tax and legal advice as mortgage advisers are not qualified to offer tax advice.
Furthermore, if your buying situation is anyway complicated, i.e., buying more than one property, or you’re purchasing as a company, or non-resident, qualified tax advice should be sought.
Common questions about stamp duty
The Stamp Duty Land Tax Holiday was announced by the Chancellor of the Exchequer, Rishi Sunak, on 8th July 2020. It means that whilst the holiday is in effect, the thresholds for Stamp Duty have been raised.
Until the 30th June 2021, homebuyers will not pay Stamp Duty on homes below £500,000. From 1st July to 30th September 2021, the threshold has been lowered so that homebuyers will not pay Stamp Duty on homes below £250,000 (£300,000 for first time buyers). From 1st October onwards, the Stamp Duty Land Tax Holiday will be over, at which time normal rates will resume.
As we’ve already covered, you can only avoid paying Stamp Duty if you’re exempt for one of a few possible reasons:
- If you’re buying a property that falls below the Stamp Duty threshold.
- If you’re buying your first home (first time buyers will not pay Stamp Duty on homes below £300,000, from 1st July 2021 onwards).
If you own a second property, even a property abroad, you’ll have to pay Stamp Duty (at an additional rate) on that second property. You can take a look at the Stamp Duty rates for additional properties above.
This depends somewhat on when you complete your house purchase. If you bought your new home before 30th June 2021, you wouldn’t have had to pay Stamp Duty on homes below £500,000.
If you buy from 1st July 2021 onwards, you won’t have to pay Stamp Duty on properties below £300,000. Even once the Stamp Duty holiday ends, first time buyers won’t have to pay Stamp Duty on homes below £300,000.
No, you only pay Stamp Duty when you buy any type of property, such as a house, flat, office, plot of land, etc. (assuming you’re not exempt from paying it).
Unfortunately, not. Unless you’re a first time buyer buying a property under £300,000, or you’re buying a property under the current Stamp Duty threshold, you will have to pay Stamp Duty. Ultimately, however, it is a tax that most homebuyers have to pay.
If you’re struggling to afford the Stamp Duty Land Tax on your home, get in touch with your mortgage adviser who will be able to walk you through your next steps moving forward.