My First Property

Stamp Duty Explained

Stamp duty is a type of tax - in full it is called SDLT, standing for stamp duty land tax. It is a type of tax that is levied on property purchases. This means that if you are buying a house, then you are going to end up paying stamp duty assuming the house price is above the minimum threshold outlined below.

Here we focus on stamp duty in England and Wales - this article does not apply to Scotland, where stamp duty (called Land and Buildings Transaction Tax north of the border) rates are different.

The rate that you pay depends on various factors. As an individual buying a residential property to live in, the factor that influences the amount of stamp duty you have to pay is quite simple: the price you pay for the property that you purchase.

Stamp duty thresholds used to be set at certain levels and the percentage you paid with each increasing level was payable on the *entire* purchase price: however, this has changed recently, and now, depending on the price of the property, you will pay a different percentage of stamp duty in line with the number of stamp duty thresholds the property falls under. If this makes no sense, it is explained clearly below:

At time of writing, the most recent update to stamp duty rates took effect on 4th December 2014, and the rates are as follows:

- Buy a property up to £125,000 and pay no stamp duty

- Pay 2% on the next £125,000 (taking property values up to £250,000 under this threshold)

- Pay 5% on the next £675,000 (taking property values up to £925,000)

- Pay 10% on the next £575,000 (property values up to £1,500,000)

- Pay 12% on the rest of the property

What does this mean in practice? It means that because stamp duty rates are tiered, you avoid the odd situation that used to exist where there were hardly any properties valued at around £250,000 to £280,000 because the stamp duty being applied to the whole of the purchase price meant there was a huge jump in duty for a house with a valuation slightly above the £250,000 threshold.

Now, however, there is no great jump, due to the percentages just applying on the part of the property above each threshold value. Thus if you buy a property that costs £280,000 now, you will pay stamp duty as follows:

- 0% duty on the first £125,000
- 2% duty in the next £125,000 (this is £2,500)
- 5% on the remaining £30,000 (this is £1,500)

Therefore the total stamp duty on a £280,000 property is £4,000.

If you find the maths confusing, then there are various calculators available where you simply put in the value of the property and the calculator tells you what the amount of stamp duty you will have to pay on that property is.

In order to provide a quick and easy way for you to calculate the stamp duty that you will need to pay, we have added a Stamp Duty Calculator to our "Buyer's Tool" section here at My First Property.

Last update: 01 May 2015

More first-time house buying articles:

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  2. Budgeting and Saving Tips
  3. Property Checklist for First Time Buyers
  4. Sticking to a Budget at Auction
  5. Rejected Mortgage Application


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