A clear guide to Stamp Duty Land Tax, who pays it, how much it costs for first-time buyers, home movers and second homes, and when it falls due.
If you purchase a home in England or Northern Ireland, you may have to pay Stamp Duty Land Tax (SDLT). Depending on how much the property is worth, this could amount to thousands of pounds, so it is worth knowing in advance how much you will need to pay so you can plan your finances. Read on to find out more about stamp duty, who pays it, and how it fits into the overall cost of buying a home.
Depending on your purchasing status, stamp duty is treated differently. If you are a first-time buyer there is an increased threshold; if you are a homeowner moving home you pay stamp duty on the property value above a set threshold; and if you are buying a second home, your stamp duty payment will be charged at a higher percentage.
There are also different rules about stamp duty for people purchasing property from overseas. This is a complex area that we will not be covering in this article, but an adviser can point you in the right direction.
Thresholds and rates are set by the Government and change from time to time. Any figures below are illustrative to show how stamp duty works, rather than a quote. For current rates and an estimate for your purchase, use our stamp duty calculator.
There is some good news for first-time buyers: where the relief applies, there is typically no stamp duty to pay up to a higher threshold than for other buyers. This is a useful bonus that can help first-time buyers get a leg up on the housing ladder.
For example, under one set of rules a first-time buyer paid nothing on a home up to £300,000, then a 5% levy on the portion priced between £300,001 and £500,000, with the usual rates applying above £500,000. So on a £350,000 property, the 5% would apply to the £50,000 above the threshold, amounting to £2,500. These figures are illustrative only, so check current first-time buyer thresholds with the stamp duty calculator.
Stamp duty was first enacted by the Finance Act 2003 and came into force on 1st December 2003. If you own a property and are moving home, a levy is paid on a sliding scale based on the value of the property you are purchasing, with each band of the price taxed at its own rate.
The total stamp duty payment will be calculated by your conveyancing solicitor and paid to them initially, for them to pay HMRC upon completion of your Stamp Duty Land Tax Return. Stamp duty must be paid to HMRC within 14 days of completion.
The FCA does not regulate solicitors and some forms of buy-to-let mortgages.
Stamp duty is just one of the costs to budget for. To see how much you could borrow alongside it, read our guide on how much you can borrow, then run the numbers in the stamp duty calculator.
When purchasing a second home, such as a buy-to-let property or a holiday home, and in some cases where transactions cross over, a higher rate of stamp duty is payable on top of the standard rates.
In the same way as stamp duty for home movers, your conveyancing solicitor will calculate the amount of stamp duty due based on the price and your circumstances.
Stamp duty can be a large additional cost on top of your deposit when purchasing a property. It is important that you are aware of the approximate amount due so you can be sure you can afford the overall costs of buying. Factoring it in early helps you avoid surprises at completion.
There is plenty of helpful information on stamp duty from gov.uk, and you can get an estimate tailored to your purchase using our stamp duty calculator. If you would like to talk it through alongside your mortgage, our advisers are happy to help.
Estimate your stamp duty in seconds, then speak to an adviser who will help you budget for every cost of buying and find the right mortgage for your circumstances.