Tax is payable when you purchase a property above a certain value. The amounts can be quite significant and you’ll have to factor this into your budget when considering how much deposit you need to buy a house. The actual name of the tax and the rates applied depend on where you’re buying in the UK, whether you’re a first time buyer and, if not, how many properties you currently own.
The calculator below reflects the appropriate Land Tax to be paid if your purchase completes after 30th September 2021. L&C is not able to advise on tax matters and we recommend you take specialist advice on the Land Tax level which may be applicable to your circumstances.
Published 11 December 2018
If you’re buying a property costing more than £125,000, you’ll usually need to pay Stamp Duty Land Tax (SDLT) on your purchase.
However, under changes announced in the 2017 Budget, different rules apply if you’re a first-time buyer purchasing a property costing less than £500,000.
Here, we explain exactly how the stamp duty system works, so you can work out how much you’ll need to pay.
Stamp duty is a tax which homebuyers, with the exception of most first-time buyers, must pay when purchasing a property costing over the stamp duty threshold, which is currently £125,000. It is payable whether you are buying a freehold or leasehold property.
The amount you pay is a percentage of the purchase price and that percentage will depend on the value of the property.
Stamp duty can add up to a considerable amount, so it’s important to budget for this in advance.
You can use London & Country’s stamp duty calculator to work out how much you can expect to pay. Simply enter the purchase price of your property and the calculator will do the rest.
If you’re a first-time buyer who has never owned a residential property, you don’t have to pay stamp duty on the first £300,000 of the property value if you’re buying a home costing up to £500,000. You must pay 5% stamp duty on the portion between £300,001 and £500,000. That means the stamp duty threshold for first-time buyers is as follows:
Standard stamp duty rates apply to first-time buyers purchasing properties costing more than £500,000. For joint applications, both parties must be first-time buyers. If either has owned property before, the standard stamp duty rates will apply.
These changes were announced in the 2017 Budget on November 22nd and came into immediate effect.
Under changes announced in the 2018 Autumn Budget, this relief was extended to first-time buyers of shared ownership properties. All properties already bought by first-time buyers under shared ownership schemes since 22 November 2017 qualify as well, provided they cost £500,000 or under at the time of purchase. So, for example, if you spent £300,000 on a 50% share in a property valued at £600,000 property, you wouldn’t get the relief.
If you do qualify for stamp duty relief on a shared ownership purchase made after 22 November 2017, you can claim a stamp duty refund by writing to the Stamp Duty Land Tax office. To find out more, visit the HMRC website.
Those opting to pay stamp duty in stages sometimes have to pay stamp duty on the net present value of the rents too. If you qualify for first time buyers' relief, this will apply to stamp duty on rents as well as your initial payment.
If you’re buying a property in Scotland, you'll pay Land and Buildings Transaction Tax (LBTT) rather than stamp duty. LBTT rates are shown below. Scottish buyers are not affected by changes to first-time buyer stamp duty rules in England.
If you’re buying a property in Northern Ireland, you’ll pay the same stamp duty rates as if you were buying in England, including the first-time buyer exemption on the first £300,000 of the property value.
If you’re buying a property in Wales, under the Welsh government’s Land Transaction Tax (LTT), which replaced stamp duty in April 2018, there is no LTT to pay for all buyers purchasing homes costing up to £180,000.
The following table shows the main residential LTT rates and bands in Wales.
If you already own a home and are buying another property, either to rent out, use as a holiday home, or for any other purpose, you’ll usually have to pay 3% on top of the normal stamp duty rates in England and NI or 4% in Scotland and Wales. This surcharge will also apply even if the main home you currently own is overseas.
If you purchase a house for your child, and are named on the deeds of the property, whilst already owning a property, the surcharge will be payable.
If you already have a Buy to Let property, and are selling your main residence and buying a new main residence for you to live in, you will not have to pay the surcharge.
If you complete on your new property while still owning your old home you will have to pay the surcharge. However, if you sell your old home within 36 months you can reclaim the extra tax.
Stamp duty is payable on the price you pay for your new build property. Stamp Duty is payable on fixtures and fittings which are considered to be attached to the building, such as fitted wardrobes or a kitchen. However, Stamp Duty is not payable on removable fixtures and chattels such as carpets and curtains. Some builders may give you an incentive payment to help cover the cost of your stamp duty.
If you are purchasing a percentage of a shared ownership property, you can opt to pay Stamp duty on just the share you are purchasing, or if you are likely to purchase additional shares you can opt to pay stamp duty on the full purchase price. Please refer to the government website for full information.
You have 14 days from the date of completion to pay your stamp duty.
The date of completion is the day the purchase is finalised and your solicitor or conveyancer pays any remaining purchase money to the seller’s solicitor – it’s usually the day when you get the keys to your new home. In most cases, your solicitor or conveyancer will take care of paying the stamp duty on your behalf and they should confirm this for you. If you don’t file the stamp duty return on time, you could incur a penalty and also have to pay interest on top.
Most first-time buyers no longer have to pay stamp duty, but there are a few other types of property transaction where you don’t have to pay stamp duty. These include:
You can find more about stamp duty exemptions on the Gov.uk website.
Stamp duty is just one of the additional fees you’ll need to pay when you buy a house. To find out more about the other additional costs, read L&C's guide to the cost of buying a house.
(Rates shown correct at the time of writing – February 2019)
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