Do you pay Stamp Duty on a new build?

Do you pay stamp duty on a new build?

The stamp duty paid on a property in the UK can vary significantly depending on several factors.

In this blog, we’ll answer your questions about stamp duty including what it is, who needs to pay what and when. 

What is stamp duty?

Stamp duty is a tax levied against a buyer by the UK government whenever a single property valued over a certain threshold is purchased. This includes new build homes and second hand properties. 

If this is not paid, a property cannot be legally bought in the UK. 

The tax’s origins can be traced all the way back to 1694 when it was one of the methods used to raise funds for the war against France. Although, back then, it was not just property that was subject to tax – purchases of hats and medicine were also considered fair game. 

Historically, it’s not been the most popular of taxes and was one of the primary drivers of the American revolution.  

How much is stamp duty for first-time buyers?

The UK Government has attempted to adjust the tax’s bands in recent years so that the wealthier pay more and lower income households pay less stamp duty. 

A law was passed in November 2017 that allowed first-time buyers to be exempt from paying stamp duty if the property they purchased cost £300,000 or less and they intended to live in it.   

Alternatively, if a property was sold for over £300,000 but under £500,000, a first-time buyer would only be taxed on £200,000 of the property’s value.  

How is stamp duty calculated?

For non-first-time buyers the amount you pay on your stamp duty is based on the value of the property you are buying and whether it is your only home, or you have multiple homes. If you have a second home, add an additional 3% to each of the percentages listed below:

  • If your property is valued at £125,000 or less, you won’t need to pay any stamp duty. 
  • If your property is valued between £125,001 and £250,000, you’ll need to pay 2% of the value of the property.
  • For a property valued between £250,001 and £925,000, you’ll need to pay an additional 5% stamp duty based on how far over £250,000 your property is valued at.
  • A similar rule applies if your property is valued between £925,001 and £1.5 million – apart from this time you’ll pay an additional 10% on how far over £925,000 your property is valued at.
  • If your property is valued at over £1.5 million – you’ll need to also pay an additional 12% on how far over £1.5 million your property is valued at.

To help make sense of it all, the Government website page on stamp duty land tax illustrates what this might look like for a property worth £295,000:

0% on the first £125,000 = £0

2% on the next £125,000 = £2,500

5% on the final £45,000 = £2,250

Total Stamp Duty = £4,750

What contributes towards my property’s stamp duty?

Anything fitted (i.e., a fitted wardrobe, a fitted kitchen or an add-on conservatory) is considered part of the house’s overall value and will be taxed by the UK government. 

Anything removable, such as your curtains or your TV, is not.

When do you pay stamp duty on a new build?

Your stamp duty must be paid within 14 days of your new build being completed. This payment itself would not be made directly by you. Your solicitor or conveyancer would normally pay the stamp duty on your behalf but confirm with your individual service provider.

We hope our blog has been useful, if you have any questions on stamp duty, your Sales Advisor will be happy to help!