Stamp Duty - Everything you need to know
If you’re buying a home that costs over £125,000, you’ll have to pay Stamp Duty Land Tax on your purchase. Find out the rates, how to pay it and when it’s not payable.
- What is the Stamp Duty threshold?
- How much is Stamp Duty?
- When is Stamp Duty paid?
- When is Stamp Duty not paid?
- How to pay Stamp Duty
What is the Stamp Duty threshold?
Stamp Duty Land Tax is due on residential properties in England, Northern Ireland and Wales that cost over £125,000. There’s a different threshold for non-residential properties.
This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.
In Scotland, when you buy a property you pay the Land and Buildings Transaction Tax, instead of Stamp Duty.
How much is Stamp Duty?
There are several rate bands for Stamp Duty. The tax is calculated on the part of the property price that falls within each band.
For example, if your new home costs £175,000, you’ll pay £1,000 (2% of the property value that falls within the relevant band).
The table below lists each band and its rate.
|Minimum property purchase price||Maximum property purchase price||Stamp Duty rate (only applies only to that part of the property price that falls within each band)|
|Over £1.5 million||12%|
Stamp Duty rate on additional properties
Since 1 April 2016, buyers of additional residential properties, such as second homes and buy-to-let properties, will have to pay an extra 3% in Stamp Duty on top of current rates.
This increased rate applies to properties above £40,000. The increased rate however, doesn’t apply to purchases of caravans, mobile homes or houseboats.
If you buy a new main residence but there’s a delay in selling your previous main residence, you’ll have to pay the higher Stamp Duty rates as you’ll now own two properties. But you can request a refund for the amount above the normal Stamp Duty rates if:
- You sell your previous main residence within three years, and
- You claim the refund within three months of the sale of your previous main residence, or within 12 months of the filing date of your self-assessment tax return, whichever comes later.
When is Stamp Duty paid?
You’ll need to submit a Stamp Duty Land Tax return and pay what you owe within 30 days of completing the purchase of your home.
If you don’t submit a return and pay the tax with that 30 days, HMRC may charge you penalties and interest.
When is Stamp Duty not payable?
You’ll automatically avoid Stamp Duty if you buy a property below £125,000. But for many homebuyers this just isn’t possible.
There are other circumstances in which Stamp Duty is either not payable or can be reduced:
- Slightly over rate band - If the price is only just within a higher band, ask the seller or estate agent if they would accept a slightly lower price.
- Transfer of property in separation or divorce - If you are divorcing or separating from your spouse or partner, there’s no Stamp Duty to pay if you transfer a proportion of your home’s value to them. Read more in our guide Protecting your home ownership rights during divorce or dissolution.
- Transfer of deeds - If you transfer the deeds of your home to someone else – either as a gift or in your will – they won’t have to pay Stamp Duty on the market value of the property.
However, if you exchange properties with another person, you will each have to pay Stamp Duty on the property you receive based on its market value. To find out more about transfer of deeds, go to the GOV.UK website.
How to pay Stamp Duty
Usually your solicitor will deal with the Stamp Duty return and payment for you, although you can do it yourself. But either way, you’re responsible for making sure it’s all submitted on time.
If the price of your new home is under £125,000, you must still submit a return even though you won’t need to pay any Stamp Duty.
Proposed changes to payment process
In 2016, the government will consult on proposed changes to the Stamp Duty Land Tax filing and payment process. One proposed change is to reduce the time given to file and pay the tax from 30 days to 14 days. These changes would take effect in the 2017-2018 tax year.