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‘Stamp duty’ has a long and varied history, with its roots dating back to 1694, where it was introduced solely as a way of raising funds through taxes for England’s ongoing war with France. Its name hails from the fact that a physical stamp needed to be applied to written or printed documents, denoting that the tax had been paid, before the transaction was legally complete. Historically, stamp duty not only applied to properties, but any form of ‘legal instruments’, which have included newspapers, playing cards, dice, insurance policies, and even cheques!

What is stamp duty?

Today, stamp duty is purely a tax paid on property and land purchases in the UK.

Stamp duty has steadily evolved over the years through a series of Stamp Acts, and since 2003 there has been no need for a physical stamp on documentation. Further changes in legislation in 2014, 2015 and 2016 meant that the ‘slab’ method of calculation (one band rate based on the entire value of the property) was replaced with a tax that is calculated much like income tax, with a tax-free band, then increasing band rates depending on the property purchase price.

Stamp duty is paid at different rates and named differently, depending on where in the UK your property is being purchased:

  • In England or Northern Ireland: Stamp Duty Land Tax (SDLT)
  • In Scotland: Land and Buildings Transaction Tax (LBTT)
  • In Wales: Land Transaction Tax (LTT)

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 if the cost of the property or land exceeds £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 will 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.

Standard SDLT rates in England and NI

Min cost of property Max cost of property Stamp duty tate
£0 £125,000 0%
£125,001 £250,000 2%
£250,001 £925,000 5%
£925,001 £1,500,000 10%
£1.5m+ 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 would be calculated as follows:

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

 

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

First time buyers

If you are a first time buyer (you have never purchased or part-purchased 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 relief. This means you can purchase a property up to a value of £300,000 without paying any stamp duty whatsoever. There is currently no first time buyer relief in Scotland or Wales.

If you have been gifted a property by a relative, you would not be considered a first time buyer. Similarly, if you bought your first home with the intention of renting it out, you would not be entitled to the relief. The relief is meant to help people who are looking to purchase their first home as their main residence.

With the first time buyer tax break, if the property you are purchasing is over £300,000 but under £500,000, you will be liable to pay 5% tax on the difference – the amount over £300,000 and up to the purchase price.

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

So, if you purchase your first home in England or NI costing £400,000, 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.

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 is 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+ 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+ 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+ 15%

It’s worth noting that if you purchase a property, but there is a delay in selling your main residence, you will have to pay the higher rate of stamp duty, as you will effectively own two properties. But fear not: you can request a refund of the increased rates if you sell your previous main residence within three years, and you claim the refund 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 payable 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 a stamp duty land tax (SDLT) return, which is available on the HMRC website.

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

  • If you are purchasing a property which just crosses over into a more expensive band, it may be worth asking the owner or estate agent if they can lower the price to reduce the amount of stamp duty you will be liable to pay.
  • If you transfer your property to another individual, whether this is as a gift, as part of a divorce settlement, or in your will, you will not be liable for stamp duty. However, if you exchange properties with someone else, you will be liable for stamp duty at the applicable rates, based on the market value at the time of the exchange.
  • And, as mentioned above, first time buyers pay no stamp duty on property purchases up to £300,000.