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Stamp duty

What is stamp duty and how much do I pay?

Stamp duty is what you pay if you purchase property above a certain value in England and Northern Ireland – but rules are slightly different in Scotland and Wales

By Mehdi Punjwani

Published: 01 July 2021

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What is stamp duty?

Stamp Duty Land Tax (SDLT) – usually just referred to as stamp duty - in England and Northern Ireland, is a tax you must pay if you purchase a property or land that costs more than a set amount.

In Scotland, the equivalent is Land and Buildings Transactions Tax. In Wales, buyers pay Land Transaction Tax.

What happened to stamp duty during the Covid-19 pandemic?

On July 8 2020 in response to the Covid-19 pandemic and to encourage transactions in the property market, the UK Government introduced a stamp duty holiday for property purchase. It meant the first £500,000 of property value was exempt from the tax.

The stamp duty holiday has now ended. But a short-term interim tax period is in place in England and Northern Ireland until 30 September 2021. This means the first £250,000 of property value is exempt from the tax until this date. The level is £300,000 for first time buyers.

The nil rate band threshold will return to its pre-pandemic level of £125,000 for primary residential properties from 1 October 2021, although stamp duty tax relief will continue for eligible first time buyers.

Who has to pay stamp duty?

You’ll pay stamp duty on both residential and non-residential properties, but the threshold is different for each.

You’ll also pay stamp duty whether you’re buying:

  • Your first home
  • A new home
  • An additional property

When do I pay stamp duty?

You’ll be required to pay stamp duty within 14 days of completion, when:

1.    The contracts are exchanged

2.    The money is transferred to the seller

3.    The documents are given to the buyer

4.    The seller has moved out

5.    The keys are handed over

How do I pay stamp duty? 

You’ll pay stamp duty by filing a SDLT return to the HMRC. If you have a solicitor, conveyancer or agent they’ll usually do this for you for a fee. They should also help you claim any relief you’re eligible for, such as a first-time-buyer discount.

How much stamp duty do I have to pay?

The amount you’ll pay in stamp duty varies as there are several different rate bands – and where you fall will depend on what type of buyer you are (for example first time buyers and second property buyers have different thresholds) and how much the property costs.

It also depends where you're buying property in the UK as the tax is different in Wales and Scotland.

Your overall tax bill is calculated based on the sliding scale - or tiered rates. In England and Northern Ireland, from 1 October 2021, the following standard stamp duty tax rates will apply. These are:

  • 0% on the first £125,000 of property value
  • 2% between £125,001 and £250,000 of property value
  • 5% between £250,001 and £925,000 of property value
  • 10% between £925,001 and £1.5m of property value
  • 12% on the portion of property value above £1.5m 

Stamp duty for home movers

If you’re a home mover in England or Northern Ireland you’ll pay the standard rate of stamp duty. This means if the property you’re buying costs less than £250,000 (until 30 September) or £125,000 from 1 October 2021, then you won’t have to pay SDLT.

But if it costs any more than this, you’ll pay a certain percentage on different portions of the total amount.

By way of example, from October 2021, if your new home costs £400,000 you’ll pay:

  • no tax on the property’s value up to £125,000
  • 2% on the property’s value between £125,001 and £250,000
  • 5% on the property’s value from £250,001 to £400,000

The overall stamp duty payable here will be £10,000

Stamp duty for first-time buyers

If you’re a first-time buyer in England and Northern Ireland – and anyone else you’re buying with has also never owned a property before - then you won’t pay stamp duty on the first £300,000 of the value of your first home. But this only applies if your property purchase price is £500,000 or less.

Under the scheme you won’t have to pay any stamp duty at all if the property costs up to £300,000.

For example, if you were buying your first home for £350,000 you’d be eligible for the 0% stamp duty band for most of the property’s value – you’d only have to pay 5% on £50,000. This means you’ll pay a total of £2,500 in stamp duty for this property – whereas if you weren’t a first-time buyer, you’d be paying £7,500.

If your first home costs above £500,000 you’ll pay the standard rate of stamp duty – which means if the property is valued at £650,000 you’ll pay £22,500 in stamp duty. This is the same as for someone buying their next home – you won’t be eligible for the first-time buyer relief.

Stamp duty for second-property buyers

If you're buying a second home in England or Northern Ireland, whether it's as a holiday home or a buy to let investment, the stamp duty rules and rates are slightly different.

Second property buyers pay a flat rate 3% surcharge on top of the 'usual' stamp duty tax rates for first property purchase (see the rates for home-movers above). The 3% charge is a slab tax, which means it is applicable to the full purchase price of the property.

Buyers benefit from the nil rate band on stamp duty - £250,000 until 30 September 2021 and then £125,000 thereafter, but are still required to pay an extra 3% on top of this. 

As an example, even if your second property costs £100,000, you’ll still be required to pay the 3% charge – so that would be £3,000 in total payable as stamp duty. 

 

 

Can I get a refund on stamp duty?

If you’re intending to purchase a new home and sell your old property, and there’s a delay in the selling process, you’ll be liable to pay the higher rate of stamp duty for additional properties. This means you’ll be paying an extra three per cent.

However, you’ll be able to request a refund for this amount if you sell the old property within three years, as long as you claim it either:

  • Within three months of selling the old property
  • Within 12 months of filing your self-assessment tax return

Whichever comes later will apply to you.

Do I pay stamp duty if I’m in Scotland or Wales?

If you’re in Scotland or Wales you’ll still have to pay stamp duty, but the rates and bands are slightly different and it’s known as:

What is the Land and Building Transaction Tax?

The Land and Building Transaction Tax (LBTT) is what you pay instead of stamp duty in Scotland. As with the rest of the UK this is calculated by percentage, but the boundaries are slightly different – you’ll need to pay the LBTT on properties costing over £145,000.

There is also an additional charge for purchasing a second property – however in Scotland it’s 4%.

 

Home mover

Second-property buyer

Portion of price

Percentage to pay as stamp duty

Percentage to pay as stamp duty

£0 - £145,000

0%

4%

£145,001 - £250,000

2%

6%

£250,001 - £325,000

5%

9%

£325,001 - £750,000

10%

14%

£750,000 +

12%

16%


You’re also still eligible for relief if you’re a first-time buyer. You’ll be exempt from paying LBTT on properties valued up to £175,000, but for anything above that the normal rates will apply.

What is the land transaction tax?

The land transaction tax (LTT) is what you pay instead of stamp duty in Wales – it’s also calculated by percentage using slightly different thresholds.

The LTT nil rate threshold is £180,000 and this is the same for first time buyers.

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