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    Complete Guide to Stamp Duty: Understanding Your Tax

    When you're buying a property, it's likely you'll need to pay Stamp Duty Land Tax, a form of tax on your purchase.

    Complete Guide to Stamp Duty: Understanding Your Tax
    Paying Stamp Duty is part of the conveyancing process and will be dealt with by your solicitor. It's worth being aware of what it is, how you pay it and how much you'll need to pay. It's determined by the price of your property but can be impacted by whether you're a first time buyer, already own a home and where in the UK you're buying.

    Please note: This information was updated on 13.09.23 and is in line with the latest announcement from the government regarding 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. 

    Who pays Stamp Duty?

    It is usually 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.

    The cost is dependent on the price of the property. It's organised into bands. There are different rates if you are buying a second home or a buy-to-let property and in many 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, 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 pay using our Stamp Duty Calculator.

    England and Northern Ireland

    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. As of 23rd September 2022 the rates in England and Northern Ireland for freehold sales and transfers, and most leasehold properties, are:

    Purchase price bands (£)

    SDLT

    Up to £250,000 (this includes shared ownership properties if the share is under £250,000)

    0%

    £250,001 and £925,000

    5%

    £925,001 and £1.5 million

    10%

    Over £1.5 million

    12%

    First Time Buyer Stamp Duty

    First Time Buyers don't pay Stamp Duty on properties worth up to £425,000. They pay 5% on the portion between £425,001 and £625,000. 

    This means First Time Buyers who buy a property worth up to £625,000 will pay no Stamp Duty on the first £425,000 and only pay 5% on the remaining amount.

    If the property costs more than £625,000, normal rates will apply.

    Do I qualify for first time buyer Stamp Duty relief?

    You will not need to do anything to qualify for the First Time Buyer exemption – your conveyancing solicitor will ensure you meet the appropriate criteria.

    You will qualify for the Stamp Duty exemption if:

    • You are a First Time Buyer
    • You are buying a home to live in
    • Your property is below £425,000 (for no Stamp Duty at all)
    • Your property is under £625,000 (you will only pay Stamp Duty on the amount over £425,000)
    • 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 must 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. 
    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. 

    For a mixed-use property you pay:

    • 0% on properties under £150,000
    • 2% on properties from £150,001 to £250,000
    • 5% on anything above £250,001
    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?

    Usually, your solicitor or conveyancer will deal with Stamp Duty on your behalf. They tend to submit your return and pay the amount due on the date of completion, and then either add the amount to their fees or 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 £250,000 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)

    Rates for additional properties

    You usually pay 3% on top of the normal Stamp Duty rates if you own another residential property. 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.

    If you are replacing your main residence, you will not have to pay the extra 3% if your old property is already sold. However, if you have not yet sold your main residence by the time you complete the purchase on your new property you will have to pay the higher rates.

    If you sell your previous home within 36 months you can claim a refund with HMRC for the extra rates.

    Buy-to-Let Stamp Duty

    By-to-Let Stamp Duty Rates (as of 23rd September 2022):
     

    Purchase price bands (£) SDLT
    £0 to £40,000 0%
    £40,001 to £250,000 3%
    £250,001 to £925,000 8%
    £925,001 to £1.5 million 13%
    Over £1.5 million 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.

    Land and Buildings Transaction Tax bands (from 1st April 2021):

    Purchase price bands (£)

    LBTT percentage rate (%)

    Up to £145,000

    0%

    £145,001 to £250,000

    2%

    £250,000 to £325,000

    5%

    £325,001 to £750,000

    10%

    Over £750,000

    12%

     

    First Time Buyers in Scotland

    When the normal bands apply again from 31 March 2021, Scotland will have a different exemption for First Time Buyers. First Time Buyers will be 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 6% 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 (£) Additional Dwelling Supplement (%)
    Up to £145,000 6%
    £145,001 to £250,000 8%
    £250,001 to £325,000 11%
    £325,001 to £750,000 16%
    Above £750,000 18%

    Land Transaction Tax in Wales

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

    The Welsh rates (from 10th October 2022) are:

    Purchase price bands (£)

    Percentage rate (%)

    Up to £225,000

    0%

    £225,001 to £400,000

    6%

    £400,001 to £750,000

    7.5%

    £750,001 to £1,500,000

    10%

    Over £1,500,000

    12%

    Stamp Duty Calculator

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

    Stamp Duty FAQs

    Can you add Stamp Duty to your mortgage?

    Although some lenders will allow you to add Stamp Duty to your mortgage, it is not recommended. Not only does this add to the amount of money you are borrowing, but it also will increase the LTV (loan-to-value) of your mortgage which could increase your borrowing costs.

    What is the 3-year rule for SDLT?

    The 3-year rule means that if you sell or give away your previous main residence within three years of purchasing your new home, then you can apply for a refund for the percentage of SDLT you paid for owning multiple properties.  

    Who is exempt from Stamp Duty?

    If the property you are buying is worth less than £250,000 you will not have to pay Stamp Duty. First Time Buyers don’t have to pay Stamp Duty on properties worth up to £425,000.

    In Scotland you do not have to pay Lands and Building Transactions Tax up to £145,000. For First Time Buyers the threshold is £175,000.

    In Wales you are exempt from paying Land Transaction Tax if your property is worth under £225,000.
     

    Updated April 2024 by Emily Smith
     

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