Stamp Duty Explained

If you’re buying a property costing more than £125,000, you’ll 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.

What is stamp duty?

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 threshold

Property valueStamp duty rate
Up to £125,000        Zero
The next £125,000 (the portion from £125,001 to £250,000)         2%
The next £675,000 (the portion from £250,001 to £925,000)         5%
The next £575,000 (the portion from £925,001 to £1.5m)         10%
The remaining amount (the portion above £1.5m)         12%

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.

Stamp duty for first time buyers

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:

Property valueStamp duty rate
Up to £300,000        Zero
The next £200,000 (the portion from £300,001 to £500,000)         5%

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 22 and came into immediate effect.

Stamp duty on second homes

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. 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 on new builds

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.

Stamp duty on shared ownership properties

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.

When do you pay stamp duty?

You have 30 days from the date of completion to pay your stamp duty.

The date of completion is the day all the contracts have been signed and dated – and 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 take longer than 30 days, you could be subject to a fine and you may even have to pay interest on top.

The Government plans to reduce the amount of time you have to pay any stamp duty you owe from 30 days to 14 days with effect from April 2018.

Other Stamp duty exemptions

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:

• A divorce or separation where one partner is transferring their share of the property to the other
• If the property is a gift
• If the property is left in a will
• If you buy a freehold property for less than £40,000

You can find more about stamp duty exemptions on the website.

Stamp duty in Scotland, Northern Ireland and Wales

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.

Property ValueLBTT rate
Up to £145,000      Zero
The next £105,000 (the portion from £145,001 to £250,000)       2%
The next £75,000 (the portion from £250,001 to £325,000)       5%
The next £425,000 (the portion from £325,001 to £750,000)      10%
The remaining amount (the portion above £750,000)      12%

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.

The same applies if you’re buying in Wales, although the Welsh government is considering plans to replace stamp duty with a land transaction tax in 2018. It will confirm details of how this will work in late 2017.

As in England, there is an additional surcharge on second homes brought in Scotland.

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 – November 2017)

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