Guide to Stamp Duty

No doubt you’ve heard of stamp duty before, but what exactly is it and how much should you pay? This guide from haart will answer your questions and help you prepare for paying stamp duty when you move or buy property.

What is stamp duty?

Stamp duty, also known officially as stamp duty land tax is one of many costs you will have to consider when you move home or buy one for the first time. You can find a full list of these costs in our guide. Although it’s been through some changes, stamp duty is essentially a tax you pay when you buy property in the UK.

It’s slightly different across the UK, England and Northern Ireland buyers pay stamp duty land tax, but in Scotland it is land and buildings transaction tax, and in Wales it’s called land transaction tax.

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Who has to pay stamp duty and when?

Anyone who isn’t a first-time buyer must pay stamp duty on a property they buy if said property is valued at over £250,001. The rules for first-time buyers are slightly different, with what they pay also depending on how much the property is worth.

You have 14 days after you complete on your property purchase to file a Stamp Duty Land Tax (SDLT) return and pay. If you don’t do this on time, HMRC might charge you penalties and interest.

Stamp Duty for non-residents

From 1 April 2021, if you’re a non-UK resident buying a residential property in England or Northern Ireland, you will have to pay an additional 2% on top of the existing rates for properties costing more than £40,000. There are some conditions for a ‘relief’ on this payment, but all the details of this can be found at Gov.uk.

How much stamp duty do you pay?

Stamp duty is not a single set figure, which is why it can sometimes get a little confusing. The amount you pay varies depending on the price of the property being bought, and where it is in the UK. There are several ‘rate bands’ for Stamp Duty a little like the different bands of council tax.

Stamp duty is calculated on the part of the property purchase price falling within each band. If someone has purchased property before (therefore no longer a first-time buyer) stamp duty rates are as follows:

• 0% on property valued up to £250,000
• 5% on property valued between £250,001 - £925,000
• 10% on property valued between £925,001 - £1,500,000
• 12% on any property valued above £1,500,001+

Landlords must pay an extra 3% of stamp duty when they purchase a buy-to-let property in England and Northern Ireland.

First-time buyers

If you’re a first-time buyer in England or Northern Ireland, you get a little relief on the amount you pay. It’s to help first-time buyers to get onto the property ladder. As a first-time buyer, you do not pay any stamp duty on a property worth up to £425,000. The stamp duty rates are as follows:

• 0% on property valued £0 - £425,000
• 5% on property valued between £425,001 - £625,000
• 8% on property valued between £625,001 - £925,000
• 10% on any property valued above £925,001 - £1,500,000
• 12% on any property valued above £1,500,001

Stamp duty exemptions

There are things called ‘stamp duty reliefs’ that, if you fit the criteria, can reduce the amount of tax you pay. Keep in mind that you must complete an SDLT return in order to claim, even if no tax is payable.

You don’t have to pay stamp duty if:

• Property is left to you in a will
• Property is transferred because of divorce or separation
• Property purchased is over the £250,000 price band and the seller agrees to accept a lower offer
• Property is given as a gift or transferred with no money or other payment exchanging hands
• Property is moveable, so for example, a holiday lodge or motorhome
• Property is a houseboat (unless it comes with a garden) as only purchases that use land space are taxable

How do you pay stamp duty?

Possibly the easiest part of stamp duty is that your solicitor or conveyancer will usually calculate and pay your stamp duty bill on your behalf. They collect the money from you in advance, then submit your return and pay the stamp duty on completion day.

Buy your next home with haart

For more information on stamp duty or if you’ve found the perfect property to buy and need to calculate it, get in touch with your local haart branch so we can use our expert knowledge to help you: find your local branch number.

Buying your first or next home? We have lots of other useful guides from advice for buyers to tips for upsizing too, so grab a cup of tea and take a read.