Stamp Duty Land Tax is a tax on property purchases that you have to pay when buying a new home. Some people, like first-time buyers, don’t have to pay it.
To help you understand what Stamp Duty is, how much you can expect to pay, and whether you’re exempt, we’ve created this guide. And if you’re still unsure about how much stamp duty you’ll need to pay after reading this, you should check with your solicitors.
What is Stamp Duty?
When buying property in England and Northern Ireland, you need to pay Stamp Duty Land Tax (SDLT) on it. This is a tax on property purchases, sort of like VAT on everyday items.
In Scotland and Wales, it’s called something else (but is the same thing):
In this guide we’ll refer to it as Stamp Duty - its most common name.
How much is Stamp Duty?
The amount will depend on your property price, location, and your situation.
The simplest way to check is with HMRC’s calculator.
Current Stamp Duty rates
- Up to £250,000: 0%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Over £1.5 million: 12%
Remember: Stamp Duty is a marginal tax
Stamp Duty is worked out in bands, applied to different chunks of the property price. Here’s an example of what we mean:
If you buy a property for £300,000, you’ll pay the following:
- 0% on the first £250,000 = £0
- 5% on the portion between £250,001 and £300,000 = £2,500
The total Stamp Duty will be £2,500.
But for first-time buyers, there’s no stamp duty at all up to the £425,000 mark. So, Stamp Duty on a property purchase of £300,000 would come to a grand total of £0.
Does everyone need to pay Stamp Duty?
Stamp Duty has to be paid on any property that costs over £250,000. You pay Stamp Duty when:
- You’re buying a freehold property
- You buy a new or existing leasehold
- You’re buying a property through a shared ownership scheme or are transferred property in exchange for a payment
Some people can apply for Stamp Duty relief, reducing the amount you need to pay. Some situations where you’ll be eligible for relief include:
- First-time buyers
- Inheriting a property
- The property costs less than £40,000
There are other reasons you may be exempt, and HMRC keep an updated list here.
When do you pay Stamp Duty?
You’ll need to pay Stamp Duty within 14 days of completing your purchase.
The responsibility for this is on you: you’ll need to file a return and pay it. But, don’t worry. Your conveyancer or solicitor will often include this in their services. You’ll pay the amount to them, instead of to HMRC. Ask them about this so you’re totally prepared.
Does Stamp Duty apply to first-time buyers?
First-time buyers won’t need to pay Stamp Duty on properties that cost up to £425,000.
If the home you’re buying costs between £425,001 and £625,000, you’ll pay a 5% Stamp Duty tax on the amount above £425,000.
If the property costs more than £625,000, you’ll pay the regular Stamp Duty rates.
It’s also worth knowing that Stamp Duty relief for first-time buyers doesn’t apply if:
- You aren’t using the property as your main residence
- You’re purchasing a buy-to-let property
- You own a stake in a property (even if you didn’t buy it)
- You’re buying with someone who already owns property
How much is Stamp Duty if you’re buying a second home?
If you’re buying a second home, you’ll pay an extra 3% on top of the standard Stamp Duty rates.
Does Stamp Duty apply for buy-to-let properties?
Stamp Duty does apply to buy-to-lets. You’ll pay the standard Stamp Duty rates, plus 3% on top. This also applies if you’re a first-time buyer investing in a buy-to-let property.
Stamp Duty: nothing to worry about?
Stamp Duty can sound complicated, but in reality, it’s pretty simple. Your conveyancer or solicitor will help you understand how much you’ll need to pay and file the return for you, so it’s a simple process. If you’re a first-time buyer, you may not even need to pay Stamp Duty at all.
To find out if you’re eligible for relief, make sure to check with HMRC’s calculator.