My First Property

Stamp Duty Explained

This page is all about stamp duty. If you are looking for more information about stamp duty land tax, and whether or not you have to pay it, read on. 

Alternatively, use our Stamp Duty Calculator Tool to find out how much you owe.

If you are purchasing a property for the first time, please see our First Time Buyer’s Stamp Duty Calculator

What is Stamp Duty?

Stamp Duty Land Tax (SDLT) is a lump sum tax that you may be liable to pay when purchasing a property or piece of land. If your purchase amounts to more than £125,000, you’ll have to pay stamp duty. If you are purchasing a second home worth more than £40,000, stamp duty will also come into play here. SDLT works a little differently for first time buyers, but we will get into that further down this article. 

Stamp duty is calculated based on the amount that you pay to purchase the property. This means that stamp duty can rise and fall based on the value of the property you are purchasing. The tax applies to both freehold and leasehold properties, whether you’re buying the property outright or with a mortgage. 

This information applies to properties purchased in England and Northern Ireland. If you are buying in Scotland or Wales, you will pay something called Transaction Tax. 

Do I Have to Pay Stamp Duty?

If you are not a first time buyer, you will not have to pay stamp duty land tax unless the property purchase exceeds £125,000.

Stamp duty is calculated using several rate bands. If the property purchase price falls into one of these bands, it will have a set percentage of stamp duty that you will have to pay. Stamp duty only applies to the part of the property price that falls within each band.

How Does Stamp Duty Work?

The stamp duty rate bands are as follows:

£0 to £125,000 = 0%

£125,001 to £250,000 = 2%

£250,001 to £925,000 = 5%

£925,001 to £1,500,000 = 10%

£1,500,000 + = 12%

Here is an example of stamp duty calculation for a house worth £300,000 

  • 0% on the first £125,000 = £0 Stamp Duty 
  • 2% on the next £125,000 = £2,500 Stamp Duty
  • 5% on the final £50,000 = £2,500 Stamp Duty

Total Stamp Duty Payable = £5,000

Here is an example of stamp duty calculation for a house worth £2,000,000

  • 0% on the first £125,000 = £0 Stamp Duty 
  • 2% on the next £125,000 = £2,500 Stamp Duty
  • 5% on the next £675,000 = £33,750 Stamp Duty
  • 10% on the next £575,000 = £57,500 Stamp Duty
  • 12% on the next £500,000 = £60,000 Stamp Duty

Total Stamp Duty Payable = £153,750

If you want to calculator what stamp duty rates you’ll have to pay, please see our Stamp Duty Calculator Tool to find out.

Do First Time Buyers Have To Pay?

If you are a first time buyer, you will only have to pay stamp duty if your purchase equals or exceeds to £300,000. 

The amount payable is calculated for any amount above this threshold. Meaning that if you (as a first time buyer) purchase a property worth £400,000, you will only pay stamp duty land tax on the £100,000 that is in excess of the initial £300,000 threshold. If a first time buyer purchases a property in excess of £500,000, you will pay the standard stamp duty rates, and will not be entitled to first time buyer’s relief. 

As of October 2018, if you purchased a property for the first time under shared ownership, you will be able to claim stamp duty relief on homes worth up to £500,000. This only applies to homes purchased on or after 22nd November 2017.

If you are a first time buyer and think that you will have to pay stamp duty, please use our First Time Buyer’s Stamp Duty Calculator to find out for sure.

How Do I Pay Stamp Duty?

Stamp duty is due to be paid within 14 days of completing the purchase of the property. This is usually classed as the date when the transaction is finalised. 

In many cases, your solicitor will usually handle the payment of the stamp duty, however it legally remains your responsibility to ensure it is paid. 

If there is no stamp duty to be paid on your home, for instance if it falls below the threshold, you are still required to submit a return. This is simply to declare to the government how much you paid. 

Learn more about filing a stamp duty land tax return here

More first-time house buying articles:

  1. Buying a House: Exchange & Completion
  2. 10 Home Improvements That Add Value To Your Property
  3. How To Find an Affordable Property
  4. What is the Criteria for a Buy-to-Let Mortgage?
  5. The Downside of Renting versus Buying

 © Clarity Media    |    Copyright and disclaimer    |    My First Property     |     Insurance Details