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. 

Tobi Owens
From the Mortgages team
4
minute read
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Posted 22 JULY 2020

Please note: The information in this article was correct at the time of publication on 3 November 2020 but, because of the impact of COVID-19, things are changing rapidly. 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.

Stamp duty and coronavirus

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. The stamp duty holiday was later introduced in Scotland and Wales.

Stamp duty will now only need to be paid on the cost of a property above £500,000.
This applies both to first-time buyers and people who have bought a property before.

The 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

Under normal circumstances, 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. 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

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 are 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 has also been temporarily lowered, from 15 July 2020 to 31 March 2021. The bands now work like this:

  • Nothing up to £250,000
  • 5% between £250,001 to £325,000
  • 10% between £325,001 to £750,000
  • 12% over £750,000

Before 15 July 2020, rates were:

  • Nothing on the first £145,000
  • 2% between £145,001 and £250,000
  • 5% between £250,001 and £325,000
  • 10% between £325,001 and £750,000
  • 12% above £750,000

How much stamp duty do I pay in Wales?

Land Transaction Tax has the following bands for properties bought between 1 April 2018 and 26 July 2020:

  • 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

After 26 July, the bands will be:

  • 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

When do you have to pay stamp duty?

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. If you don’t do this within these 14 days, you’ll probably be charged penalty fees by the HMRC.

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 those 14 days to avoid penalty fees, but there’s not much more to it than that.

What is the stamp duty holiday?

To try and give the house market a boost after the COVID-19 pandemic saw it grind to a halt, the UK Government introduced a stamp duty holiday for England and Northern Ireland. This takes effect between 8 July 2020 and 31 March 2021, and significantly raises the stamp duty thresholds for home buyers. In Scotland (15th July 2020) and Wales (26th July 2020), separate holidays were introduced, also until 31 March 2021.

During the stamp duty holiday, you can avoid paying stamp duty on homes bought for:

  • £500,000 or less in England and Northern Ireland
  • £250,000 or less in Scotland and Wales

How can I calculate stamp duty?

Calculating stamp duty charges has changed since the introduction of the stamp duty holiday. We’ve put together how stamp duty is calculated for both during the holiday, and how it was beforehand.

In England and Northern Ireland:

During stamp duty holiday (8 July 2020 and 31 March 2021) Before stamp duty holiday (before 8 July 2020)
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 and 31 March 2021) Before Land and Buildings Transaction Tax holiday (before 15 July 2020)
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 and 31 March 2021) Before Land Transaction Tax holiday (before 26 July 2020)
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?

During the stamp duty holiday, between 8 July 2020 and 31 March 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, which is more than double the threshold for normal buyers, which stands at £125,000.

When the stamp duty holiday ends, the thresholds may return to these amounts, but we can’t be sure.

Stamp duty on second homes

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

You don’t have to pay the additional tax if your second home is a caravan, mobile home or houseboat.
However, you will 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 property is located in Scotland – the Scottish Government also adds 3% to its Land and Buildings Transaction Tax rates for second home purchases.
  • The second home is bought via a limited company.

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 within 14 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 stamp duty return must still be submitted even if no stamp duty is payable. 

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