If you are buying residential property or land that costs over £125,000 in England, Wales and Northern Ireland, you’ll have to pay stamp duty.
For non-residential properties, the threshold lies at £150,000.
In December 2014, the rules on stamp duty for residential properties changed, making it cheaper for 98% of homebuyers to buy a property.
Whereas under the old rules, stamp duty was paid at a single rate on the property price, now it is calculated using tax bands, a bit like income tax.
If you live in Scotland, you pay a different tax - the Land and Buildings Transaction Tax - rather than stamp duty. However, though it has a different name, it works by the same principles: it’s still a lump sum tax homebuyers must pay. The main difference is that it uses different rate thresholds.
How much stamp duty will I have to pay?Stamp duty is calculated using rate bands, with the amount of tax you’ll have to pay varying depending on where your property falls within each band.
There are online calculators you can use to figure out how much you’ll owe; or you can calculate it yourself using the tax bands below, which is applicable for properties within England, Wales and Northern Ireland.
- For the first £125,000 of the purchase price, you’ll pay no stamp duty.
- For the next £125,000 - the portion from £125,001 to £250,000 - you’ll pay a tax of 2%.
- For the next £675,000 - the portion from £250,001 to £925,000 - you’ll pay a tax of 5%.
- For the next £575,000 - the portion from £925,001 to £1.5 million - you’ll pay 10%.
- For the remaining amount - the portion above £1.5 million - you’ll pay 12%.
For example, if your new home costs £275,000, you’ll pay £3,750.
That’s 0% on the first £125,000, 2% on the next £125,000, and 5% on the final £25,000.
Can you be exempt from stamp duty charges?With some transactions, even when the property is worth over £125,000, you won’t need to pay stamp duty.
These include deals where no money or other form of payment is involved, properties that have been left to you in a will and properties that have been transferred due to a divorce or the end of a civil partnership.
However, it’s wise to check with a solicitor to make sure you’re exempt from stamp duty, as the rules may vary depending on your specific situation.
Can I add stamp duty to my mortgage?It is sometimes possible to add stamp duty to your mortgage, which would of course increase your monthly payments.
This would also increase your loan-to-value (LTV: the ratio of the amount you borrow to the value of the property), so be careful that it does not push you outside the acceptable LTV applicable to the loan you have chosen.
Would I ever need to pay more than the standard amount?If you buy an additional property, such as a buy-to-let or a second home, you’ll have to pay an extra 3% stamp duty surcharge on any property costing more than £40,000.
While regular stamp duty works as a tiered tax, the 3% surcharge for additional properties works as a slab tax, meaning it applies to the entire purchase price of the property.
How do I pay stamp duty?Stamp duty is paid by filing a return and paying the amount you owe within 30 days of completing on the sale of your property.
Most solicitors or conveyancers will arrange your stamp duty payment for you, although you can also do it yourself.
Either way, you are responsible for making sure the return is completed within the deadline to avoid a fine and the possibility of paying interest on the overdue payment.
Even if your new home costs under £125,000 and you won’t be paying any stamp duty, you still need to file a return, unless the property costs less than £40,000.