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Stamp duty explained

When buying a home in England or Northern Ireland that costs more than £125,000, you’ll need to pay Stamp Duty Land Tax (SDLT). We explain how stamp duty works, when it applies and how to pay it.

Tobi Owens From the Mortgages team
4
minute read
posted

When does stamp duty apply?

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
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Laws relating to stamp duty for first-time buyers

New laws have been introduced that have seen stamp duty abolished in England and Northern Ireland for first-time buyers on home purchases of up to £300,000. In these countries, first-time buyers will pay 5% on properties that cost from £300,001 up to £500,000, and the standard rate on anything over £500,000.

For example: If your home costs £280,000, you pay no stamp duty. If your home costs £325,000, then you pay nothing on the first £300,000, and 5% on the remaining £25,000 (as £25,000 of your purchase price falls into the 5% band). Total stamp duty to pay: £1,250.

How much do I pay in Scotland?

Scotland’s Land and Buildings Transaction Tax has the following bands:

  • Nothing on the first £145,000
  • 2% between £145,001 and £250,000
  • 5% between £250,001 and £320,000
  • 10% between £320,001 and £750,000
  • 12% above £750,00
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Stamp duty on second homes

If you buy an additional property worth £40,000 or more, then you’ll pay an extra 3% of the purchase price in stamp duty. This additional charge applies whether you purchase a second home or a buy-to-let property. This works out as: 3% payable on the first £125,000; 5% on the next £125,000; 8% between £250,001 and £925,000, and so on…

The additional tax is not payable 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 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.

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

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