Stamp duty

You’ll need to pay Stamp Duty Land Tax (SDLT) when buying a property over a certain amount. We explain how stamp duty works, when it applies, how to pay it and the cuts in stamp duty because of coronavirus. 

You’ll need to pay Stamp Duty Land Tax (SDLT) when buying a property over a certain amount. We explain how stamp duty works, when it applies, how to pay it and the cuts in stamp duty because of coronavirus. 

Mark Gordon
From the Mortgages team
4
minute read
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Posted 10 MARCH 2021

Please note: The information in this article was correct at the time of publication on 10 March 2021 but, because of the impact of COVID-19, things continue to change. We aim to keep this page updated, but please check with GOV.UK to confirm any details.

What is stamp duty? 

Stamp duty is a tax that you need to pay when you buy a property in England or Northern Ireland. In Scotland, it’s known as Land and Buildings Transaction Tax, and in Wales it’s called Land Transaction Tax. The amount of stamp duty you pay is calculated using the purchase price of a property, not the amount you’re borrowing through a mortgage.

What is a stamp duty threshold?

The stamp duty thresholds are simply the limits to when and which charges apply. If you buy a property for less than the base threshold, you won’t pay any stamp duty, whereas if the property you’re buying exceeds other thresholds, you’ll need to pay more.

What is the stamp duty holiday?

In response to the COVID-19 pandemic, the Government announced a stamp duty holiday for England and Northern Ireland, cutting stamp duty on homes bought from 8 July 2020 until 31 March 2021. This has now been extended until the end of June. The stamp duty holiday was later introduced in Scotland and Wales.

Stamp duty only now needs to be paid on the cost of a property above £500,000 in England and Northern Ireland.

This applies both to first-time buyers and people who have bought a property before.

Until the end of June, stamp duty bands will work like this:

  • Nothing on the first £500,000
  • 5% on £500,001 to £925,000
  • 10% on £925,001 to £1.5 million
  • 12% over £1.5 million

From 1 July to 30 September, stamp duty will taper off and will need to be paid on the cost of properties over £250,000.

The stamp duty bands will work like this:

  • Nothing on the first £250,000
  • 5% on £250,001 to £925,000
  • 10% on £925,001 to £1.5 million
  • 12% over £1.5 million

Under normal circumstances, and from 1 October 2021, stamp duty is payable on properties over £125,000, except for first-time buyers who are exempt from stamp duty on home purchases up to £300,000 in England and Northern Ireland. So normally, stamp duty bands work like this:

Nothing on the first £125,000

  • 2% between £125,001-£250,000
  • 5% between £250,001 and £925,000
  • 10% between £925,001 and £1.5 million
  • 12% above £1.5 million
See more on the stamp duty holiday

When does stamp duty apply?

Ordinarily you should expect to pay stamp duty on all property purchases, including leasehold property and purchases that don’t involve a mortgage. So when buying a home, you need to consider whether you’ll be able to afford the stamp duty on top of all the other costs involved.

There’s only a few exemptions to the need to pay stamp duty, and these include:

  • When a portion of a home is transferred to a spouse or partner following a separation or divorce
  • When you transfer the deeds of your home to another person as a gift
  • If you fall into the first-time buyer category and are buying a home for up to £300,000

How much stamp duty do I pay in Scotland?

Scotland’s Land and Buildings Transaction Tax (LBTT) has also been temporarily lowered, but is set to return to normal on 1 April 2021.

Until 31 March 2021 LBTT bands work like this:

  • Nothing on the first £250,000
  • 5% between £250,001 and £325,000
  • 10% between £325,001 and £750,000
  • 12% over £750,00

From 1 April 2021, the bands will look like this:

  • Nothing on the first £145,000
  • 2% on £145,001 to £250,000
  • 5% on £250,001 to £325,000
  • 10% on £325,001 to £750,000
  • 12% over £750,000

First-time buyers won’t have to pay any LBTT up to £175,000 and results in a reduction of tax of £600. This is the same as it was prior to the coronavirus reductions.

How much stamp duty do I pay in Wales?

Land Transaction Tax (LTT) has the following bands for properties bought up to 30 June 2021:

  • Nothing on the first £250,000
  • 5% between £250,001 and £400,000
  • 7.5% between £400,001 and £750,000
  • 10% between £750,001 and £1.5 million
  • 12% over £1.5 million

From 1 July 2021, the bands will look like this:

  • Nothing on the first £180,000
  • 3.5% between £180,001 and £250,000
  • 5% between £250,001 and £400,000
  • 7.5% between £400,001 and £750,000
  • 10% between £750,001 and £1.5 million
  • 12% over £1.5 million

There is no special first-time buyer rate for LTT in Wales.

When do you have to pay stamp duty, LBTT or LTT?

Once you’ve bought your new home, you’ll need to file a stamp duty land tax return and pay the amount due within 14 days in England and Northern Ireland. If you don’t do this within 14 days, you’ll probably be charged penalty fees by the HMRC.

In Wales, you have to pay within 30 days of the day after completion (or other effective date of the transaction).

In Scotland, you have to make an LBTT return to Revenue Scotland, which must be filed within 30 days of the sale being completed. You need to pay the amount due at the same time you file the return.

How to pay stamp duty

Most of the time, your solicitor will sort this out for you. However, if you’d rather do it yourself, you’ll need to fill out and submit a stamp duty land tax return form. Make sure you do it within the set time to avoid penalty fees.

How can I calculate stamp duty?

Calculating stamp duty charges has changed since the introduction of the stamp duty holiday. We show how stamp duty is calculated during the holiday, and how it was beforehand and will be after the holiday.

In England and Northern Ireland:

During stamp duty holiday (8 July 2020 to 30 June 2021) Before stamp duty holiday (before 8 July 2020) and from 1 October 2021
Home price Stamp duty rate Home price Stamp duty rate
£0-500,000 0% £0-125,000 0%
£500,001-925,000 5% £125,001-250,000 2%
£925,001-1.5 million 10% £250,001-925,000 5%
More than £1.5 million 12% £925,001-1.5 million 10%
More than £1.5 million 12%

In Scotland:

During Land and Buildings Transaction Tax holiday (15 July 2020 to 31 March 2021) Before Land and Buildings Transaction Tax holiday (before 15 July 2020) and from 1 April 2021
Home price Stamp duty rate Home price Home price
£0-250,000 0% £0-145,000 0%
£250,001-325,000 5% £145,001-250,000 2%
£325,001-750,000 10% £250,001-325,000 5%
More than £750,000 12% £325,001-750,000 10%
    More than £750,000 12%

In Wales:

During Land Transaction Tax holiday (26 July 2020 to 30 June 2021) Before Land Transaction Tax holiday (before 26 July 2020) and from 1 July 2021
Home price Stamp duty rate Home price Stamp duty rate
£0-250,000 0% £0-180,000 0%
£250,001-400,000 5% £180,001-250,000 3.5%
£400,001-750,000 7.5% £250,001-400,000 5%
£750,001-1.5 million 10% £400,001-750,000 7.5%
More than £1.5 million 12% £750,001-1.5 million 10%
    More than £1.5 million 12%

How much stamp duty does a first time buyer pay?

This depends on where you live. There are special concessions in England and Scotland, but none in Wales.

In England, during the stamp duty holiday from 8 July 2020 to 30 June 2021, you won’t need to pay stamp duty on a home bought for £500,000 or less. Before the stamp duty holiday, first time buyers could buy their home for up to £300,000 without paying stamp duty. This is more than double the threshold for normal buyers, which stands at £125,000.

From 1 July, first-time buyers of properties costing £500,000 or less won’t have to pay stamp duty on the portion up to £300,000. The rate is then 5% on the portion from £300,001 to £500,000.

If the property costs more than £500,000, first-time buyers follow the same rules as people who’ve bought a property before.

In Scotland after 1 April 2021, first-time buyers won’t have to pay any LBTT up to £175,000.

Stamp duty on second homes

The stamp duty cut has also been extended to second homes and buy-to-let properties until 30 June.

But buy-to-let investors and buyers of second homes will still have to pay a 3% stamp duty surcharge on top of the standard rate.

This works out as:

  • 3% up to £500,000
  • 8% from £500,001 to £925,000
  • 13% from £925,001 to £1.5 million
  • 15% over £1.5 million

From 1 July until 30 September, stamp duty will start at 3% on the cost of a second home or buy-to-let property up to £250,000. From 1 October, it will go back to pre-holiday rates.

You don’t have to pay the additional tax if your second home is a caravan, mobile home or houseboat.

You’ll also need to pay the additional charge if you buy your new residential property before you’ve sold the previous one because, for a short time at least, you’ll own two homes (in these circumstances, there may be ways of claiming the additional tax back via your self-assessment tax return).

The 3% surcharge applies to any of the following:

  • Your main home is abroad and the second home you buy is in the UK
  • The second home is bought via a limited company.

In Scotland, if you’re buying a second home you’ll have to pay an Additional Dwelling Supplement of 4% of the ‘relevant consideration’ (usually the purchase) price on top.

In Wales, if you buy a residential property and you already own one or more residential properties, you’ll need to pay higher residential rates:

  • 3% on the first £180,000
  • 6.5% between £180,001 and £250,000
  • 8% between £250,001 and £400,000
  • 10.5% between £400,001 and £750,000
  • 13% between £750,001 and £1.5 million
  • 15% over £1.5 million

Refund for higher rates of stamp duty

If you bought a new home but were unable to sell your old home temporarily, you’ll be forced to pay a higher rate of stamp duty as you’ll own two properties. However, if you can sell (or even give away) your old home within three years of the purchase of your new one, you’ll be able to apply for a refund on the amount charged at the higher rate. That gives you some time to get things sorted, but you’ll still need to pay the higher rate to begin with. To be eligible for the refund, you must also claim for the refund within three months of selling your old home, or within one year of filing your stamp duty tax return, whichever of those is later.

When do you not have to pay stamp duty?

The most common example of not needing to pay stamp duty, is when the property is bought for a price that’s lower than the stamp duty threshold. Other examples include you having the deeds transferred to you in a divorce, or if you were inheriting the property through someone’s will.

If you’re looking for a way to reduce the cost of stamp duty, there isn’t really a way of doing this. Although, if you’re buying a home and notice the price is slightly above a threshold for stamp duty, try negotiating the price to bring it under that threshold. Even if it’s by a penny!

Can I add stamp duty to my mortgage?

Yes, you can add your stamp duty payment to your mortgage, but you should be aware that this means it will incur interest charges. If your mortgage is over a 30-year term, this will add up, so it’s always cheaper to pay it straight away if you can, but it’s a common option if you’re unable to pay that up front with all the other fees you’re being asked to pay.

Stamp duty returns

Your solicitor usually submits a stamp duty return for you. However, whether you use a solicitor or not, it’s your responsibility to ensure that the return is filed with HM Revenue & Customs – or the relevant tax authority in Scotland or Wales – within 30 days of the completion of the house purchase. If you don’t meet this deadline, you could be fined and charged interest on the unpaid amount.

A return must still be submitted even if no stamp duty is payable. 

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