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.
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 you must pay when you purchase 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 value||Stamp 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.
If you only just fall into a higher next stamp duty threshold, you could try to reduce the amount you need to pay by asking the seller to consider a slightly lower price.
Stamp duty for first time buyers
First-time buyers used to be exempt from stamp duty if purchasing a property costing less than £250,000. However, this exemption was introduced in 2010 and removed in 2012, so they must now pay the same amount as anyone else buying a property.
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 buildsStamp 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.
Stamp duty exemptions
There are a few 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 Gov.uk 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.
|Property Value||LBTT 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.
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 – May 2017)