Everything You Need To Know About Stamp Duty

Written by Mathew McCorry

If you read my property blog now, that’ll be the end of it. I will not look for you, I will not pursue you. But if you don’t, I will look for you, I will find you and I will make you read it.

If you haven't yet purchased your own home, you may have heard of stamp duty but not totally sure what it is, or whether it'll apply to you.

In this blog, we cover all things stamp duty, from what it is to who is liable to pay it, and how much.

What is stamp duty?

Stamp duty applies to land and residential property which costs over £125,000 in England and Northern Ireland. If it's a second home, the property only needs to cost over £40,000 to be liable.

It doesn't matter if you're buying your property with cash or a mortgage, and if it's leasehold or freehold, the tax will still apply.

What does stamp duty cost?

There are varying bands for stamp duty, where different property prices are charged different percentages of tax.

Let's say you agreed to purchasing a property for £275,000. You'll be tax exempt on the first £125,000. You'll pay 2% on the next £125,000 which is £2,500. You'll also pay 5% on the final £25,000 as this falls into the next bracket, this will cost £1,250. Adding up both amounts gives you £2,750 in stamp duty.

The stamp duty rates for freehold properties are as follows:

  • Property price of £0-£125,000 is 0%
  • Property price of £125,001-£250,000 is 2%
  • Property price of £250,001-£925,000 is 5%
  • Property price of £925,001-£1.5 million is 10%
  • Property price of over £1.5 million is 12%

What if you're purchasing a second home?

The rules on stamp duty for second homes are slightly different.

Whether this second property be a second home or a buy-to-let, the buyer will have to pay a 3% surcharge in stamp duty in addition to the rates listed above. As well as this, the minimum band goes up to £40,000, so any value above this will be charged.

Don't worry though, stamp duty doesn't apply to houseboats, mobile homes or caravans.

Do first-time buyers pay stamp duty?

There is a stamp duty relief for first-time buyers. If you're purchasing your first home in England or Northern Ireland, you won't be liable to pay stamp duty for up to a property value of £300,000. This means that you could save up to £5,000.

If the value of the property you're purchasing is not above £500,000, you'll pay stamp duty on only the portion which is above £300,000. However, if the home is worth over £500,000, you'll pay the standard rates of stamp duty on the whole amount.

How do you pay stamp duty?

You can pay stamp duty yourself, but often your solicitor will do it on your behalf. You need to check this though, as ultimately you are the one responsible to pay it.

Even if you are paying under £125,000 for your home, you still need to submit a stamp duty return even though you aren't paying anything. This doesn't apply if you are exempt though.

Are there any situations where stamp duty doesn't apply?

There are yes. If you're going through a separation/divorce and one party is buying the other out of the home, there's no stamp duty which applies during this transfer.

If you're transferring the deeds of your home to someone, whether it be through a will or as a gift, the receiver won't need to pay any stamp duty.

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