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A guide to Stamp Duty

Read our guide on Stamp Duty and understand the costs of buying a home.

A guide to Stamp Duty

What is Stamp Duty Land Tax?

Stamp Duty Land Tax (SDLT) is a tax that is charged on land transactions involved in the buying of a residential property.

SDLT is a form of self-assessed transfer tax that was introduced by the Finance Act 2003 with effect from 1 December 2003. Although this replaced the previous Stamp Duty regulations, the alterations to Stamp Duty were minimal. Changes do, however, include that a tax return is made out to the HM Revenue & Customs (previously Inland Revenue). Reforms were introduced in December 2014, when the boundaries for Stamp Duty rates were changed, and particularly affect property purchases over £925,000.

From 1st April 2016, anyone buying an additional residential property, such as a second home or buy-to-let, must pay an extra 3% on top of existing SDLT. This announcement was made in Chancellor George Osborne’s 2015 Autumn Statement.

As of 22nd November 2017, First Time Buyers are exempt from paying Stamp Duty up to £300,000. There is further information being eligible for this exemption 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.

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 example, a house priced at £260,000 would attract an SDLT of £3,000, whereby 2% will be paid on £125,000 to £250,000 of the purchase price, and 5% stamp duty will be paid on the remaining £250,001 to £260,000.
A house valued at £940,000 will pay a total of £37,750 and will 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

 

As of 22nd November 2017, first time buyers are 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 (Wales will stop being part of the scheme in March 2018)

 
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



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 30 days of the 'effective date' of completion.

Regardless of whether tax is payable on a property, you are obliged to provide a return to HM Revenue & Customs. If the return is not received within 30 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 HM Revenue & Customs 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 is purchased 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

In April 2016, the details of Stamp Duty for Buy-to-Let property changed. Now, the new 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, and if the total property value is under £40,000, you will not be required to pay any SDLT.

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. 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 (£)

Old percentage rate (%)

New percentage rate (%)

Up to £125,000

0%

3%

£125,001 to £250,000

2%

5%

£250,001 to £925,000

5%

8%

£925,001 to £1,500,000

10%

13%

Above £1,500,000

12%

15%

 

Scotland Land and Buildings Transaction Tax

Changes to stamp duty in Scotland were announced in Scotland’s 2015 budget proposal.
Stamp duty in Scotland is now referred to as ‘Land and Buildings Transaction Tax’ and includes residential and commercial land and buildings transactions.

Properties costing less than £145,000 will no longer be payable, in an aim to help first time buyers.
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%

 
As of 1st April 2016, property buyers in Scotland must pay an extra 3% surcharge for additional properties, such as second homes and Buy-to-Let. Any property under the total value of £40,000 will not have to pay the extra LBTT.

Purchase price bands (£)

Old LBTT percentage rate (%)

New LBTT percentage rate (%)

Up to £145,000

0%

3%

£145,001 to £250,000

2%

5%

£250,001 to £325,000

5%

8%

£325,001 to £750,000

10%

13%

Above £750,000

12%

15%

Land Transaction Tax in Wales

From April 1st 2018, Land Transaction Tax will replace the UK Stamp Duty Land Tax in Wales.

The changes in taxation mean that there is nothing to pay on properties worth up to £150,000 and those buying homes up to £200,000 will pay up to £500 less in Stamp Duty. As the average cost of a property in Wales is £150,000 (2017) there are many who will benefit from the changes, but as the thresholds on more expensive properties have been lowered, those with properties of a higher value will be paying significantly more.

The new Welsh rates are:

  • Up to £150,000 - nothing to pay
  • £150,000 - £250,000 - 2.5%
  • £250,000-£400,000 - 5%
  • £400,000-£750,000 - 7.5%
  • £750,000 - £1.5 million - 10%
  • Over £1.5 million - 12%



 

Stamp Duty Calculator

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

Updated April 2017

Comments (4)

  • Sye

    posted on 26 Aug 2012

    Great information please let me know what we are getting for paying this stamp duty ....many thx

    Sherry

    posted on 17 Sep 2012

    is it true that there is no stamp duty on new build properties?

    shirley hambelton

    posted on 23 Jul 2014

    I am shocked! We had no idea of the costs involved, we last moved 17 years ago, because of your article we shall have to revise our plans, good job that one of the agents sent this onto us, so we are very grateful, wow, what a shock, thanks very much, shirley

    Lorraine

    posted on 1 Mar 2016

    We're retired and thought we might downsize, the calculations reveals we can't afford to do so. Absolutely ludicrous that stamp duty should cost so much, how can a few taps on a keyboard and a piece of paper be so expensive and as for estate agent fees, charging a percentage of the sale price is daylight robbery. Why should the same percentage fee be paid to them regardless of the size and location of a property especially so for properties that are sold quickly compared to those that sit on the market for months. Their fee is far higher than a solicitors who have more work to do. Why not a flat rate for a property that sells quickly and another for those that don't.

    Reallymoving response

    Hi Lorraine.  Thanks for your comments, and we entirely sympathise with you situation.

    If you are living in an area where houses sell quickly with minimal effort, you may want to try an online estate agent hybrid such as www.ewemove.com or www.purplebricks.com.  They work out hundreds of pounds cheaper.

    Good luck

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