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A guide to Stamp Duty

Stamp Duty can seem confusing, but it doesn't have to be. Have a look at our guide, designed to make it simple.

A guide to Stamp Duty
 

 

What is Stamp Duty Land Tax?

Stamp Duty Land Tax (SDLT) is a government tax that is charged when you buy a property in England or Northern Ireland.

It is often transferred by your conveyancer when you exchange on your property, and must be paid within 14 days of purchasing your home. Only those buying a property pay Stamp Duty.

Rates are dependent on the price of the property and are organised into bands. There are different rates if you are buying a second home or a buy-to-let property and in most cases, first time buyers are exempt from paying it.
There’s further information on all these different groups below.

How much Stamp Duty do you pay?

The rate of Stamp Duty you pay depends on the type of property, and whether it is residential or non-residential /mixed-use.

There are several rate bands for Stamp Duty and the tax is calculated on the part of your property that fall within each band. You can find out the exact amount of Stamp Duty you'll have to payusing our Stamp Duty Calculator.

Residential property Stamp Duty rates

Stamp Duty is payable on the rate of tax on the part of the property price within each tax band.
The Stamp Duty rates for freehold sales and transfers, and most leasehold properties, are currently:

  • 0% on the first £125,000 paid (this includes shared ownership properties if the share is under £125,000)

  • 2% on the property price between £125,001 and £250,000

  • 5% on the property price between £250,001 and £925,000

  • 10% on the property price between £925,001 and £1,500,000

  • 12% on the property price of £1,500,001 and over

For a house priced at £260,000 the Stamp Duty would be £3,000, as 2% would be paid on the £125,000 to £250,000 bracket, and 5% would be paid on the remaining £250,001 to £260,000.

A house valued at £940,000 would pay a total of £37,750 in Stamp Duty and range across 3 Stamp Duty percentage rates:

Purchase price bands (£)

Percentage rate (%)

Up to 125,000

0%

125,001 to 250,000

2%

250,001 to 925,000

5%

925,001 to 1,500,000

10%

Above 1,500,000

12%

Stamp Duty for First Time Buyers

From November 2017, first time buyers became exempt from Stamp Duty on properties up to £300,000. If they buy a property up to £500,000 they will pay no Stamp Duty on the first £300,000 and only pay on the remaining amount.

You will not need to do anything to qualify for this exemption – your conveyancing solicitor will ensure you meet the appropriate criteria.
 
You qualify for the Stamp Duty exemption if:

  • You are a first time buyer
  • You are buying a home that you will live in
  • Your property is below £300,000 (for no Stamp Duty at all)
  • Your property is under £500,000 (you will only pay Stamp Duty on the amount over £300,000)
  • Your property is not in Scotland or Wales. (Scotland has a slightly different scheme, please see below)
 
Make sure you know the definition of a first time buyer in this case:
  • You cannot have ever owned a property, even if you have now sold it (this includes inheritance)
  • You cannot have owned property abroad
  • If it is a joint purchase, both partners be first time buyers
  • You can own commercial property

From 2018, the Stamp Duty exemption for first time buyers was applied to Shared Ownership properties up to the value of £500,000. This includes both those who elect to pay the whole tax amount upfront, as well as those who pay a portion and then pay again when they staircase and buy more of the property.


Mixed-use property Stamp Duty rates

Properties accepted as being mixed-use qualify for a lower Stamp Duty rate than residential properties.
For a mixed-use property you pay:

  • 1% on properties from £150,000 to £250,000

  • 3% on £250,000 to £500,000

  • 4% on properties worth over £500,000

According to the HMRC, a mixed-use property is one that shares both elements of a residential and non-residential property. For example a flat that is connected to a shop.

Non-residential property includes:

  • Agricultural land

  • Commercial property – e.g. a shop

  • Land or property that is not used as a residence

  • Forests

  • More than 6 residential properties bought in a single transaction

How do you pay Stamp Duty?

In practical terms, your solicitor or conveyancer will generally deal with Stamp Duty on your behalf. As a rule of thumb, they tend to submit your return and pay the amount due on the date of completion, and either add the amount to their fees or (more commonly) collect the amount from you in advance.

Stamp Duty must be paid within 14 days of completion.

Regardless of whether tax is payable on a property, you are obliged to provide a return to HMRC. If the return is not received within 14 days of the completion of the transaction, you could be issued with a fine.

It is impossible to register a change in the ownership of land without the certificate that is provided by HMRC following the acceptance of a return.

Exemptions

There are certain situations in which you may be eligible for SDLT reliefs and exemptions. Stamp Duty reliefs can reduce the amount of tax you pay, however you must complete an SDLT return in order to claim, even if no tax is payable.

You don’t have to pay SDLT or file a return if:

  • property is left to you in a will

  • property is transferred because of divorce or separation

  • property purchased is over the £125,000 price band and the seller agrees to accept a lower offer

  • property is given as a gift or transferred with no money or other payment exchanging hands

  • property is a holiday lodge - any property that is movable is exempt

  • property is a houseboat - only purchases that use land space are taxable (unless your houseboat comes with a large garden, then you may still be charged)

Stamp Duty for Buy-to-Let

Buy-to-Let Stamp Duty rules mean that if you are buying an additional property, you will have to pay an extra 3% in Stamp Duty. This includes Buy-to-Let landlords and those buying second homes and holiday homes.

You will not need to pay the higher rates if you are purchasing a caravan, mobile home or houseboat. 

If the total property value is under £40,000, you will not be required to pay any Stamp Duty.

It is important to note that if you purchase a new home before you have sold your first property you will also have to pay the additional 3% SDLT. You can then reclaim this when you sell the property. If you are unable to sell your first home within 18 months of buying your new property, then you will not be entitled to reclaim the 3% SDLT surcharge.

Buy-to-Let Stamp Duty rates:

Purchase price bands (£) SDLT
Up to £125,000 3%
£125,001 to £250,000 5%
£250,001 to £925,000 8%
£925,001 to £1,500,000 13%
Above £1,500,000 15%

Scotland Land and Buildings Transaction Tax

The equivalent of Stamp Duty in Scotland is called ‘Land and Buildings Transaction Tax’. It includes both residential and commercial land and buildings transactions.

Properties costing less than £145,000 do not incur the tax.

Land and Buildings Transaction Tax bands:

Purchase price bands (£)

LBTT percentage rate (%)

Up to £145,000

0%

Above £145,001 to £250,000

2%

Above £250,001 to £325,000

5%

Above £325,001 to £750,000

10%

Over £750,000

12%

 
First time buyers in Scotland

Scotland have a different exemption for first time buyers. First time buyers are exempt from paying LBTT on properties up to the value of £175,000. If the property value is over that threshold, first time buyers will benefit from an exemption for the portion of the property that falls under £175,000. Which means all first time buyers who meet the criteria will benefit from a saving of at least £600.

The definition of a first time buyer is the same as for the Stamp Duty exemption - you cannot have owned property anywhere else in the world and you must be intending for the property to be your main residence.

Additional properties in Scotland

Those buying additional properties in Scotland must pay a 4% surcharge. This is for second homes and Buy-to-Let properties. This is called an Additional Dwelling Supplement (ADS). Any property under the total value of £40,000 will not have to pay this.

Purchase price bands (£)

Old LBTT percentage rate (%)

New LBTT percentage rate (%)

Up to £145,000

3%

4%

£145,001 to £250,000

5%

6%

£250,001 to £325,000

8%

9%

£325,001 to £750,000

13%

14%

Above £750,000

15%

16%

Land Transaction Tax in Wales

The Stamp Duty equivalent in Wales is the Land Transaction Tax.

Bandings work differently meaning there is nothing to pay on properties worth up to £180,000. As the average cost of a property in Wales is £173,000 (2019) there are many who will pay nothing, but  the thresholds on more expensive properties are lower, those with properties of a higher value will pay significantly more.

The Welsh rates are:

Purchase price bands (£)

Percentage rate (%)

Up to 180,000

0%

180,001 to 250,000

3.5%

250,001 to 400,000

5%

400,001 to 750,000

7.5%

750,001 to 1.5 million

10%

Above 1.5 million

12%

 

Stamp Duty Calculator

You can find out the Stamp Duty Land Tax cost of your house move through our Stamp Duty Calculator.

Updated January 2020

 

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