Stamp duty: Everything you need to know

Stamp duty land tax (SDLT) is a government tax paid on property and land purchases worth more than £125,000 in England and Northern Ireland. There are slight variations on this tax in Wales (Land Transaction Tax, or LTT) and Scotland (Land and Buildings Transaction Tax, or LBTT).

What is stamp duty?

From its inception in 1694 when it was introduced as a way of raising taxes to fund England’s ongoing war with France, stamp duty has evolved steadily through a series of Stamp Acts.

Some of the most recent changes now mean that the “slab” method of calculation (one rate based on the entire value of a property) has been replaced with a new, tiered mechanism.

It’s calculated much like income tax, with a tax-free band, then increasing band rates depending on the property purchase price.

The bands in Scotland and Wales are different to those in England and Northern Ireland. If you’re first-time buyer, you may be completely exempt from paying – see below for more detail.

How much stamp duty do I have to pay?

If you are purchasing a property or land in England or Northern Ireland, you will have to pay SDLT on residential property or land over £125,000.

In Scotland, you will be liable for LBTT if the property costs over £145,000, and in Wales if it exceeds £180,000.

The amount you have to pay in stamp duty depends on many factors, including the purchase price of the property you are buying, whether you are a first-time buyer, or whether you are looking to purchase more than one property.

Cost of property

The amount of stamp duty payable depends on the purchase price of the property in question. There are several bands, each of which should be applied to the entire purchase price, with tax only being payable on the relevant tax band. This means you could end up paying multiple rates on one property.

Although it may push you out of your comfort zone, this is why it is always worth negotiating the price of a property. Doing so could result in paying far less stamp duty and save you thousands of pounds.

Standard SDLT rates in England and NI

Min cost of property Max cost of property Stamp duty rate
£0 £125,000 0%
£125,001 £250,000 2%
£250,001 £925,000 5%
£925,001 £1,500,000 10%
£1.5m+ N/A 12%

 

Standard LTT rates in Wales

Min cost of property Max cost of property Stamp duty rate
£0 £180,000 0%
£180,001 £250,000 3.5%
£250,001 £400,000 5%
£400,001 £750,000 7.5%
£750,001 £1,500,000 10%
£1.5m+ 12%

 

Standard LBTT rates in Scotland

Min cost of property Max cost of property Stamp duty rate
£0 £145,000 0%
£145,001 £250,000 2%
£250,001 £325,000 5%
£325,001 £750,000 10%
£750,000+ 12%

Stamp duty example

If you bought a house costing £400,000, the amount of stamp duty payable in England or Northern Ireland would be £10,000. Here’s how it’s calculated:

Standard SDLT rates in England and NI – £400,000 purchase

Applied SDLT rates Amount to pay
0% on the first £125,000 £0
2% on the next £125,000 £2,500
5% on the final £150,000 £7,500
Total £10,000

As you can see, you’ll be paying more than one rate of tax on the same property. So in this instance, three different rates apply:  0%, 2% and 5%.

Standard LTT rates in Wales – £400,000 purchase

Applied LTT Rates Amount to pay
0% on the first £180,000 £0
3.5% on the next £70,000 £2,450
5% on the final £150,000 £7,500
Total £9,950

 

Standard LBTT rates in Scotland – £400,000 purchase

Applied LBTT Rates Amount to pay
0% on the first £145,000 £0
2% on the next £105,000 £2,100
5% on the final £150,000 £7,500
Total £9,600

Stamp duty for first-time buyers

If you’re a first time buyer (you have never purchased, part-purchased or inherited a freehold or leasehold property in the UK or abroad), and you are purchasing a property in England or Northern Ireland, you will qualify for first-time buyer’s stamp duty relief. There is currently no first-time buyer relief in Scotland or Wales.

This means you can purchase a property up to a value of £500,000 without paying any stamp duty on the first £300,000. You pay a reduced stamp duty rate of 5% on the amount over £300,000.

If the purchase price is over £500,000, you do not qualify for first-time buyer’s relief, and you will have to pay the stamp duty at the standard rate on the entire purchase price.

If you buy your first property as a buy-to-let, you would not be entitled to the relief as it’s only meant to help those looking to purchase their first home as their main residence.

Let’s use the same example we did above: a £400,000 property in England or NI. Your stamp duty liability would be calculated as follows:

First-time buyer SDLT rates in England and NI – £400,000 purchase

Applied SDLT rates Amount to pay
0% on the first £300,000 £0
5% on the final £100,000 £5,000
Total £5,000

If you’re planning on purchasing a property jointly, both parties must be first-time buyers to qualify for the relief. However, unmarried couples buying jointly can get a reduced rate of stamp duty if only one of you is a first-time buyer.

Stamp duty on second homes

If you buy a second home, whether as a holiday home for personal use or a buy-to-let property, you will be liable to pay stamp duty on the cost of the property if it’s over £40,000.

This does not apply if the property in question is a caravan, houseboat or mobile home. The payable rates will be 3% higher for each tax band, so:

Second home and buy-to-let SDLT rates in England and NI

Min cost of property Max cost of property Stamp duty rate
£0 £125,000 3%
£125,001 £250,000 5%
£250,001 £925,000 8%
£925,001 £1.5m 13%
£1.5m+ N/A 15%

 

Second home and buy-to-let LTT rates in Wales

Min cost of property Max cost of property Stamp duty rate
£0 £180,000 3%
£180,001 £250,000 6.5%
£250,001 £400,000 8%
£400,001 £750,000 10.5%
£750,001 £1,500,000 13%
£1.5m+ N/A 15%

 

Second home and buy-to-let LBTT rates in Scotland

Min cost of property Max cost of property Stamp duty rate
£0 £145,000 3%
£145,001 £250,000 5%
£250,001 £325,000 8%
£325,001 £750,000 13%
£750,000+ N/A 15%

It’s worth noting that if you’re moving home and there’s a delay in selling your previous residence, you may have to pay the higher rate of stamp duty, as you’ll effectively own two properties for a short period of time.

But fear not: you can request a refund of the increased rates if you sell your previous main residence within three years. To be eligible for the refund, you must claim it within three months of selling the previous property – or within 12 months of submitting your self-assessed taxes, whichever comes later.

How and when do I pay stamp duty?

You have to pay any stamp duty within 30 days of the purchase of a property.

Typically, your solicitor will sort out the paperwork for you, and will often ask for payment before the sale is completed. However, you can calculate your own tax yourself, and pay it by filling out an SDLT return.

You do not have to pay stamp duty if you are remortgaging because you already own the property…even if you have only a leasehold.

Do I always have to pay stamp duty?

You will be liable to pay stamp duty if the purchase price of your property is over the threshold of the lowest applicable band: that is, £125,000 in England and Northern Ireland; £180,000 in Wales; and £145,000 in Scotland.

However, there are some occasions where you can attempt to reduce your stamp duty rate, or not pay any stamp duty at all:

  • You’re purchasing a property which just crosses over into a more expensive band. Ask the owner or estate agent if they can slightly lower the price to reduce the amount of stamp duty you will be liable to pay.
  • You transfer your property to another individual. This can be as a gift, as part of a divorce settlement, or in your will and means you will not be liable for stamp duty. However, if you exchange properties with someone else, you will still need to pay stamp duty at the applicable rates, based on the property’s market value at the time of the exchange.
  • First time buyers pay no stamp duty on property purchases up to £300,000.

Now read our guide on the total cost of buying a home

Edited by: Sarah Guershon

Last updated: 30 January, 2019

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