What is Stamp Duty?

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Stamp Duty Land Tax (SDLT) is a tax applicable to anybody who buys property in England or Northern Ireland over a certain value. In Scotland, it is known as the Land and Buildings Transaction Tax (LBTT).

When do I have to pay Stamp Duty?

You will pay Stamp Duty on residential properties costing more than £250,000 or if you are buying a second home.

If you're an eligible first-time buyer, you will pay no Stamp Duty on homes costing up to £425,000 and will receive a discounted Stamp Duty rate on property purchases up to £625,000.

The latest Stamp Duty thresholds were set on September 23, 2022.

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How much is Stamp Duty?

In England and Northern Ireland, the Stamp Duty threshold starts for residential properties valued from £250,000. It is charged as a percentage of the home's value and goes up incrementally:

  1. Houses up to £250,000 = 0%
  2. Houses between £250,001 and £925,000 = 5%
  3. Houses between £925,001 and £1.5 million = 10%
  4. Houses over £1.5 million = 12%.

The tax only applies to the value of the home over £250,000. So, for example, if you bought a home for £350,000, you would only pay tax on £100,000 (£350,000 - £250,000), so this would be £5,000 (5%).

LBTT thresholds in Scotland

The same principles apply to residential properties in Scotland, but the bands vary slightly:

  1. Less than £145,000 = 0%
  2. £145,001 to £250,000 = 2%
  3. £250,001 to £325,000 = 5%
  4. £325,001 to £750,000 = 10%
  5. Over £750,000 = 12%.

Stamp Duty fees vary if you're buying a second property or if you're a first-time buyer.

Stamp Duty for second homes

Those buying second homes in England and Northern Ireland over £40,000 are subject to the following rates:

  1. Up to £125,000 = 3%
  2. Between £125,001 and £250,000 = 5%
  3. Between £250,001 and £925,000 = 8%
  4. Between £925,001 and £1.5 million = 13%
  5. Over £1.5 million = 15%.

In Scotland, this is known as the Additional Dwelling Supplement. For homes over £40,000, the bands are:

  1. Up to £145,000 = 3%
  2. £145,001 to £250,000 = 6%
  3. £250,001 to £325,000 = 9%
  4. £325,001 to £750,000 = 14%
  5. Above £750,000 = 16%.

Stamp Duty relief for first-time buyers

For first-time buyers in England and Northern Ireland, the Stamp Duty threshold is higher, at £425,000. This means they will only have to pay Stamp Duty for the proportion of their home that is over £425,000 -- for example, a £500,000 home would have a 5% Stamp Duty fee on just the £75,000. This threshold applies to homes up to £625,000. Any homes over that value will be subject to the same taxes as non-first-time buyers. The threshold in Scotland is £175,000.

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How to pay Stamp Duty

Now for the good news -- your solicitor or conveyancer will generally pay Stamp Duty on your behalf. They will add the amount to their fees or ask for the money upfront.

Stamp Duty must be paid within two weeks of your property's completion date. Your solicitor or conveyancer must also submit a return to HMRC, or you could be liable to pay a fine, so make sure you ask for proof of this when you complete.

Stamp Duty: the takeaways

As you move up the property ladder, it's likely that Stamp Duty will be something you have to pay. So don't let it creep up on you, make sure you've factored it into your home buying fees!

You can use this free Stamp Duty calculator here if you're not sure or ask your Sales Advisor who will be happy to help you work it out!

Looking for more advice on buying property? Read the Avant Life blog.