What Is Stamp Duty and how much do I pay?
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Stamp Duty Land Tax (SDLT) is imposed on property buyers, whereas Capital Gains Tax (CGT) is levied on property sellers. In the UK, Stamp Duty is one of the most discussed forms of taxes in the property market and is often debated within the House of Commons.
The SDLT cut announced by the UK Government in 2022 will remain in place until 31st March 2025 to help support the housing market.
Unless the SDLT cut is extended, in 2025, Stamp Duty will increase back to its standard rates.
In this article, we will cover what Stamp Duty is, how much you pay, when you have to pay it and when stamp duty isn't payable.
What is Stamp Duty?
Stamp Duty in the UK is a tax on purchasing property and land. It is a transfer tax that must be paid when buying a residential or commercial property in England, Wales or Northern Ireland.
If you buy a home in Scotland, the Land and Buildings Transaction Tax (LBTT) replaced the UK-wide Stamp Duty. If you are living in Wales however, you will need to pay Land Transaction Tax (LTT) instead of Stamp Duty.
The amount of Stamp Duty you need to pay depends on the value of the property and the government's specific rules. The rates are not fixed and can change over time per government policy.
Stamp Duty applies to lease and freehold properties – even if you buy it outright or with a mortgage.
If you purchase a residential property that costs more than £250,000, you will most likely pay Stamp Duty unless you qualify for First-Time Buyers Relief.
What is first-time buyers relief?
First-time buyers in England and Northern Ireland who purchase a property costing up to £425,000 do not have to pay stamp duty. If the new property is worth £425,001 to £625,000, then they pay 5% Stamp Duty, but only on the value above £425,000.
If first-time buyers purchase a property over £625,000, they will need to pay the standard rates of Stamp Duty.
How much is Stamp Duty?
How much Stamp Duty is will depend on which band the property purchase sits in:
£0 - £250,000 = 0%.
£250,000 - £925,000 = 5%.
£925,000 - £1,500,000 = 10%.
£1,500,000+ = 12%.
The Stamp Duty tax is only calculated on the part of the property purchase falling within each band, for example:
If you buy a property for £290,000, the Stamp Duty Land Tax (SDLT) will be:
0% on the first £250,000 = £0.
5% on £250,001 to £290,000 = £1999.95.
Total SDLT = £5,000.
Stamp Duty calculator
When working out how much stamp duty land tax you are liable to pay, you may want to use a Stamp Duty Calculator which will help you ensure that you can make knowledge-driven decisions.
What is Stamp Duty on second homes?
If you are looking to purchase a second property, such as a second home, you'll have to pay an extra 3% in Stamp Duty on top of the standard rates:
£0 - £250,000 = 3%.
£250,000 - £925,000 = 8%.
£925,000 - £1,500,000 = 13%.
£1,500,000+ = 15%.
This increased rate applies to properties bought for £40,000 or more but doesn't apply to caravans, mobile homes or houseboats.
What is Stamp Duty for non-residents?
If you are not a British citizen and are buying a residential property in England or Northern Ireland, you will have to pay an additional 2% on top of the standard Stamp Duty rates for properties costing more than £40,000.
When Is Stamp Duty not payable?
There may be certain circumstances in which Stamp Duty is not payable:
First-Time Buyers relief:
First time buyers may be eligible for a reduced rate or exemption from Stamp Duty.
Each tax year, there is a threshold known as the nil-rate band below which no Stamp Duty is payable. This threshold will change from year to year.
Transfers of property:
Stamp Duty may not be payable if you transfer property or land without a sale, such as through a gift or inheritance.
If the property has no outstanding mortgage, gifted properties will not need SDLT to be paid.
But SDLT may be payable if there is an outstanding mortgage, which would be paid to the relevant band.
Property left under the terms of a will is not subject to SDLT, and there is no requirement to inform HMRC.
When purchasing a shared ownership property, where you buy a portion of a property and pay rent on the remaining share, the Stamp Duty is calculated on the value of the share you're purchasing rather than the entire property value.
When do you have to pay Stamp Duty?
You must pay Stamp Duty Land Tax within a 14-day timeframe after completing the purchase of a property.
The payment and submission are usually made by your solicitor or conveyancer on your behalf to the HM Revenue and Customs (HMRC) as part of the conveyancing process.
We recommend that you discuss the payment process and timeline with your solicitor or conveyancer when purchasing a property to ensure that the Stamp Duty is paid on time and by applicable regulations.
Otherwise, HMRC might charge you penalties and interest.
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