If you’re a homeowner, or hoping to become one, you will likely have heard of Stamp Duty. If you’re unsure of how it works or need a refresher, read on for our handy guide below.
What is Stamp Duty?
The Stamp Duty Land Tax (SDLT) is paid in England and Northern Ireland when buying a property or piece of land. There are some exemptions to Stamp Duty, as well as relief available in certain circumstances, such as for first-time buyers.
For property or land in Scotland you pay Land and Buildings Transaction Tax; for Wales you pay Land Transaction Tax (this replaced Stamp Duty Land Tax from 1 April 2018). For more details of these, please visit https://www.gov.scot/policies/taxes/ and https://gov.wales/land-transaction-tax-guide.
Stamp Duty applies to freehold and leasehold properties, whether you are purchasing with a mortgage or outright. It can also apply to both residential and commercial properties, although the amount paid may vary.
How much does Stamp Duty cost?
It depends on the property and circumstances of the purchase.
If you’re buying your main residential property, you won’t pay any Stamp Duty on the first £125,000 of the property value (unless you’re a first-time buyer, which we’ll cover below). Anything over £125,000 is split into the following bands:
| Minimum property purchase price | Maximum property purchase price | Stamp Duty rate |
|---|---|---|
| £0 | to £125,000 | 0% |
| the next £125,001 | to £250,000 | 2% |
| the next £250,001 | to £925,000 | 5% |
| the next £925,001 | to £1.5 million | 10% |
| anything over £1.5 million | 12% |
First-time buyers
First-time buyers qualify for Stamp Duty relief and won’t pay any Stamp Duty on properties worth up to £425,000. If purchasing a property that’s worth over this amount, there will be no tax eligible on the first £425,000 and then 5% applied to anything over this amount up to £625,000. First-time buyers purchasing a property worth over £625,000 will not be eligible for Stamp Duty relief.
Second homes
If you’re buying an additional property, Stamp Duty will apply. You will normally need to pay an additional 3% Stamp Duty on top of the standard rates for properties over £40,000. This doesn’t apply to mobile homes, caravans or houseboats.
Buying a new main residence but haven’t sold your existing property yet?
It’s important to note if you’re buying a new property to replace your existing home but have not sold your main residence on the day you complete on your new property, you may be required to pay higher rates. This is because technically you will own two properties. However, you can apply for a refund of the additional rates paid if you sell your main home within 36 months.
Non-UK residents
If you’re defined as a non-UK resident when purchasing a property you may be required to pay a 2% surcharge on top of the standard Stamp Duty rates. For the purposes of Stamp Duty, a non-UK resident is defined as a person who is not present in the UK for at least 183 days (6 months) during the 12 months before the purchase takes place.
Stamp Duty for commercial properties
You may be eligible to pay Stamp Duty in most circumstances when buying a commercial or non-residential property or piece of land. The rates you could pay are as follows:
| Property, lease premium or transfer value | Stamp Duty rate |
|---|---|
| £0 up to £150,000 | 0% |
| the next £150,001 to £250,000 | 2% |
| Anything over £250,000 | 5% |
There are nuances and additional points to be aware of in relation to Stamp Duty when buying a commercial property. Your solicitor or conveyancer should be able to calculate the exact amount you will need to pay but if you are unsure you will need to seek advice.
When does Stamp Duty get paid?
You may wonder when and how the money gets handed over. Stamp Duty needs to be paid within 14 days of completion. The payment is normally administered by your solicitor but it’s important to remember that ultimately the responsibility lies with you to make sure it’s submitted on time.
Are there circumstances where Stamp Duty isn’t payable?
Yes, there are some instances where Stamp Duty is not applicable. Examples include (but are not limited to):
- Transfer of a property in pursuance of a court order in the cases of separation, divorce or dissolution may be exempt.
- Property left in a will may not be eligible for Stamp Duty.
- Gifting a property to someone else may not require Stamp Duty to be paid, provided there is no outstanding mortgage on the property.
Again, there will be nuances and points that may need clarification under any exemptions. The solicitor managing your purchase will be able to tell you what you’re obligated to pay under Stamp Duty Land Tax.
Looking to buy a new property and want help finding the best mortgage deal for your circumstances? Get in touch with one of our experienced Mortgage Advisers today to see how they could guide you through the process. You can also read more of our handy guides here.
The information provided regarding tax treatment or legislation is based on our understanding of current UK legislation law, tax law and HM Revenue and Customs’ practice (April 2022), all of which may be subject to change. Tax treatment will depend on your individual circumstances. The Financial Conduct Authority does not regulate tax advice.
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