If you’re buying a home that costs more than £125,000, you’ll have to pay Stamp Duty Land Tax (SDLT) on your purchase. Use this guide to find out more about how Stamp Duty works, Stamp Duty for first time buyers, rates for second homes and how it is paid.
What is Stamp Duty?
In England, Northern Ireland and Wales you’re liable to pay Stamp Duty when you buy a residential property, or a piece of land, that costs more than £125,000 (£40,000 for second homes).
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 or land you will pay a 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 purchase price that falls within each band.
For example, if you buy a house for £275,000, the Stamp Duty Land Tax (SDLT) you owe is calculated as follows:
- 0% on the first £125,000 = £0
- 2% on the next £125,000 = £2,500
- 5% on the final £25,000 = £1,250
Total SDLT = £3,750
Stamp Duty rates*
|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
*Stamp duty for residential leasehold properties are charged differently.
Stamp Duty on second homes
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 for each band.
This increased rate applies to properties bought for £40,000 or more.
It doesn’t apply to 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.
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.
For an application form and more information, visit the GOV.UK website
Stamp Duty for first time buyers
First time buyers pay the same amount of Stamp Duty as everyone else.
In the past, first time buyers did not have to pay Stamp Duty on property worth up to £250,000, however this is no longer the case.
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 might charge you penalties and interest.
Find out more about Stamp Duty penalties and interest on the GOV.UK website
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’re 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.
Find out about other situations where Stamp Duty might not be payable on the GOV.UK website
How to pay Stamp Duty
Usually your solicitor will deal with the Stamp Duty return and any payment due for you, although you can do it yourself.
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 (unless exempt) even though you won’t need to pay any Stamp Duty.
Learn about filing a return and paying Stamp Duty on the GOV.UK websiteopens in new window
Proposed changes to payment process
The government is currently consulting on making 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 could take effect in the 2017-2018 tax year.
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