What is Stamp Duty and how much do I need to pay?
, by Matt Stevens
If you’re buying a property in the UK, there’s a good chance that you will need to pay Stamp Duty Land Tax to the Government. Whether you need to pay the Tax and how much you will owe all depends on the price of the property being bought and your situation as a homebuyer.
In this guide, we aim to give you an overview of Stamp Duty by answering some key questions and looking at other topics around the Tax. We’ll cover:
- What is stamp duty?
- What is a stamp duty threshold?
- Who pays stamp duty?
- How much is stamp duty in England and Northern Ireland?
- How much is the land and buildings transaction tax (LBTT) in Scotland?
- How much is the land transaction tax (LTT) in Wales?
- When and how do you pay stamp duty?
- Can stamp duty be added to my mortgage?
What is Stamp Duty?
Stamp Duty Land Tax (England and Northern Ireland), LBTT (Scotland) and LTT (Wales), is the tax you’re liable to pay when you buy a property of a certain value in the UK. It’s payable as a lump sum and the amount you will need to pay is adjusted depending on the value and type of property purchased.
These taxes apply to freehold purchases (property and land owned outright), leasehold purchases (property and land owned for the duration of the lease agreement with the freeholder), shared ownership schemes and a transferred land or property in exchange for payment, for example you take on a mortgage or buy a share in a house. It also applies whether you buy with cash or a mortgage.
What is a Stamp Duty Threshold?
Stamp duty thresholds define the price brackets at which different charges apply when purchasing a property. If you buy a property below the base threshold, you won't be required to pay any stamp duty. However, if the property you're purchasing falls within higher threshold ranges, you'll incur additional stamp duty costs.
Who pays Stamp Duty?
From 1st October 2021 the SDLT threshold will be £125,000, (you may need to submit a return even if your property is valued under £125,000). This is the lowest threshold for the Tax, once you purchase a home valued above it, you will need to pay a percentage of the value to the Government. Should you buy non-residential land or property, you will need to pay SDLT if the value is over £150,000.
However, the rules are different if you are a first-time buyer as there is further relief available. If you are buying additional property to your main residence you will pay a higher level of tax that is linked to the value. This also applies to those who purchase a property before selling their current residence. We’ll look at the rates and rules for these cases later in the guide.
How much is Stamp Duty in England and Northern Ireland?
Stamp Duty is calculated as a percentage of your home’s price. There are several rate bands and the Tax is calculated on the amount of the purchase price that falls within each band.
First, we’ll look at the standard rates for residential property. These will apply if you’re moving home and you have already owned property in the past, you’re planning on living in the property as your main residence, and the property doesn’t contain any non-residential elements (for example, a shop attached to a flat).
The SDLT bands for residential property are as follows:
Rates from 1 July 2021 to 30 September 2021
| Property or Lease Premium or Transfer Value | SDLT Rate |
| Up to £250,000 | 0% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
For example, if you bought a house for £350,000, you would pay:
0% on the first £250,000 = £0
5% on the next £100,000 (the price between £250,001–£925,000) = £5,000
So, the total SDLT payable on your property would be £5,000 (£0 + £5,000).
Rates from 1 October 2021
| Property or Lease Premium or Transfer Value | SDLT Rate |
| Up to £125,000 | 0% |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
For example, if you bought a house for £350,000, you would pay:
0% on the first £125,000 = £0
2% on the next £125,000 (the price between £125,001–£250,000) = £2,500
5% on the remaining £100,000 (the price between £250,001–£300,000) = £5,000
So, the total SDLT payable on your property would be £7,500 (£0 + £2,500 + £5,000).
Please note: Stamp Duty Land Tax is calculated differently for leasehold property sales. Please refer to the Government’s guidance for more details.
Stamp Duty for First-Time Buyers
As we’ve mentioned, there is Stamp Duty relief available to first-time buyers in England and Northern Ireland. This policy was first introduced in the 2017 Budget, coming into force in November 2017. First-time buyers purchasing a Buy-to-Let property cannot claim this relief.
These reliefs are:
First-time buyers purchasing residential property priced up to £300,000 pay no Stamp Duty.
First-time buyers purchasing residential property priced up to £500,000 pay no Stamp Duty on the first £300,000, then 5% SDLT on the remaining amount over £300,000.
However, if your first home is priced at over £500,000, you will not benefit from any of this relief and will need to pay Stamp Duty in the usual way outlined above.
For example, if you were a first-time buyer buying a property for £375,000, you would pay:
0% on the first £300,000 = £0
5% on the remaining £75,000 (the price between £300,001–£375,000) = £3,750
So, the total SDLT payable on your property would be £3,750 (£0 + £3,750).
Who is Eligible for First-Time Buyer Stamp Duty relief?
To be able to claim first-time buyer SDLT relief, you and all other people involved in the purchase must be buying your first residential property.
Additionally, you can’t claim SDLT first-time buyer relief if:
- You’ve previously inherited a property, even if you immediately sold it
- You’ve owned property abroad, but not in the UK
- You plan on buying the property to let out, even if you have never bought any others.
Please note: Stamp Duty relief is also available for other circumstances. The Government has full details and guidance for each of these.
Stamp Duty for Buy-to-Let and Additional Properties
If you are planning on buying an additional residential property, such as a second home, or a buy-to-let property, you will be required to pay an additional 3% Stamp Duty on top of the regular rates (this also applies to first-time buyers purchasing a Buy-to-Let).
Please note: Should the total price of the additional property be £40,000 or less, you don’t need to pay any Stamp Duty at all.
The SDLT bands for additional properties are as follows:
The higher rates from 1 July 2021 to 30 September 2021
| Purchase Price | SDLT Rate |
| Up to £250,000 | 3% |
| Over £250,000 to £925,000 | 8% |
| Over £925,000 to £1.5 million | 13% |
| Over £1.5 million | 15% |
For non-UK residents, with effect from 1 April 2021 the rates are increased by 2%.
For example, if you were purchasing a second home or buy-to-let property priced at £425,000, you would pay:
3% on the first £250,000 = £7,500
5% on the next £175,000 (the price between £250,001–£925,000) = £8,750
So, the SDLT payable on your additional property would be £16,250 (£7,500 + £8,750).
The higher rates from 1 October 2021
These rates also apply if you bought a property before 8 July 2020.
| Purchase price | SDLT Rate |
| Up to £125,000 | 3% |
| Over £125,000 to £250,000 | 5% |
| Over £250,000 to £925,000 | 8% |
| Over £925,000 to £1.5 million | 13% |
| Over £1.5 million | 15% |
For non-UK residents, with effect from 1 April 2021 the rates are increased by 2%.
For example, if you were purchasing a second home or buy-to-let property priced at £425,000, you would pay:
3% on the first £125,000 = £3,750
5% on the next £125,000 (the price between £125,001–£250,000) = £6,250
8% on the remaining £175,000 (the price between £250,001–£425,000) = £14,000
So, the SDLT payable on your additional property would be £24,000 (£3,750 + £6,250 + £14,000).
Moving Home Before Selling your Old Property
If you move home before you’ve sold your current home, this is still classed as buying an additional residential property in the eyes of the Government, so you will need to pay the extra 3% rate.
But, if you complete the sale of your previous house within 36 months of purchasing your new one, you can claim the extra 3% back as a refund — the Government has a form you can fill in to start this process. You need to make this claim within three months of the sale of your old residence.
Stamp Duty for Mixed-Use Properties
Mixed-use properties are those with both residential and non-residential elements, such as a flat adjoining a shop, or a residential house on a working farm.
The Government allows mixed-use properties to calculate their Stamp Duty using non-residential rates, which differ from regular residential property rates.
The SDLT bands for mixed-use and non-residential properties are as follows:
| Property or Lease Premium or Transfer Value | SDLT Rate |
| Up to £150,000 | 0% |
| The next £100,000 (the portion from £150,001 to £250,000) | 2% |
| The remaining amount (the portion above £250,000) | 5% |
For example, if you were purchasing a mixed-use property priced at £260,000, you would pay:
0% on the first £150,000 = £0
2% of the next £100,000 (the price between £150,001–£250,000) = £2,000
5% of the remaining £10,000 (the price over £250,000) = £500
So, the SDLT payable on your additional property would be £2,500 (£0 + £2,000 + £500).
Who is entitled to a Stamp Duty exemption?
There are a number of situations that qualify for a Stamp Duty exemption, where no tax needs to be paid and no return needs to be filed with HMRC. You can be exempt from SDLT if:
- No form of payment changes hands for a land or property transfer.
- Property is left to you in a will.
- Property ownership is transferred to you because of divorce or separation.
- You buy a freehold property for less than £40,000
- The property is moveable, such as a caravan, mobile home, or houseboat.
Although these are some of the most common reasons for a SDLT exemption, there are others. You can find out more about these in HMRC’s guidance to exemptions.
How much is the Land and Buildings Transaction Tax (LBTT) in Scotland?
The Land and Buildings Transaction Tax (LBTT) replaced UK Stamp Duty Land Tax in Scotland on 1 April 2015. It is a tax applied to residential and non-residential land and buildings transactions (including commercial leases).
As in England and Northern Ireland, tax is payable at different rates on each portion of the purchase price within specified tax bands for Scotland. As well as this, the Additional Dwelling Supplement, charged at 4%, may apply.
Rates from 1 April 2021 for residential LBTT
| Purchase Price | LBTT Rate |
| Up to £145,000 | 0% |
| £145,001 to £250,000 | 2% |
| £250,001 to £325,000 | 5% |
| £325,001 to £750,000 | 10% |
| Over £750,000 | 12% |
Land and Buildings Transaction Tax for First-Time Buyers.
There is a Land and Buildings Transaction Tax relief available to first-time buyers in Scotland from 1 April 2021. This relief consists in tax not being chargeable in respect of the first £175,000, therefore effectively raising the zero tax threshold for first-time buyers from £145,000 to £175,000. Also, buying a property above £175,000 will benefit from the relief on the portion of the price below the threshold. Which means that, all first-time buyers will benefit from the relief by up to £600.
For example, if a first time buyer buys a property of £200,000 the tax due without relief would be £1,100, but with the first time buyer relief it will be £500.
There are certain conditions that the first time buyer should met for the relief to be available:
- The transaction is an acquisition of a major interest in land.
- The land consists entirely of residential property and includes a dwelling.
- The buyer is a first-time buyer who intends to occupy the dwelling as the buyer’s only or main residence.
- The transaction is not a linked transaction.
- The transaction is not one to which Additional Dwelling Supplement (“ADS”) applies.
Where there is more than one buyer the relief will be available only if each buyer meets all the relevant criteria. If not then the relief will not be available.
Who is Eligible for First-Time Buyer LBTT Relief?
A first-time buyer means a person who does not own nor has previously owned a residential property in Scotland, the rest of the UK or the rest of the world. Also, all forms of ownership in the legal systems of the UK which are equivalent to ownership in Scotland are treated as ownership as well for the purposes of this relief. To be able to claim LBTT relief, all the people involved in the purchase must be buying their first residential property.
Additionally, you can’t claim LBTT first-time buyer relief if:
- An individual holds a tenant's interest under certain types of lease in the rest of the UK.
- You’ve previously inherited a property, even if you immediately sold it.
- You’ve owned property abroad, but not in the UK.
- You’re the beneficiary of a bare trust.
Land and Buildings Transaction Tax for Buy-to-Let and Additional Properties
If you are planning on buying an additional property in Scotland, such as buy-to-let properties and second homes, you may need to pay ADS. On the other hand, if you're replacing your main residence ADS may not apply.
ADS is 4% of the ‘relevant consideration’ (usually the purchase price).
Moving Home Before Selling your Old Property
If the property you’re buying is replacing your main residence which has already been sold, you will not pay the extra 4%. But, if you have not sold your main residence on the day you complete your new purchase you’ll have to pay ADS. However, you can apply for a refund if you sell your previous main home within 18 months.
Land and Buildings Transaction Tax for Mixed-Use Properties
For non-residential or ‘mixed’ land and property the rate of tax is determined by reference to percentages of the chargeable purchase price within the bands below. Anything of economic value, for example the seller has opted for tax so that VAT is chargeable on the price, in exchange for land or property counts towards the chargeable consideration. In this case, LBTT is payable on the price including VAT.
| Purchase Price | LBTT Rate |
| Up to £150,000 | 0% |
| Above £150,000 to £250,000 | 1% |
| Above £250,000 | 5% |
For example, if you were purchasing a mixed-use property priced at £260,000, you would pay:
0% on the first £150,000 = £0
1% of the next £100,000 (the price between £150,001–£250,000) = £1,000
5% of the remaining £10,000 (the price over £250,000) = £500
So, the LBTT payable on your additional property would be £1,500 (£0 + £1,000 + £500).
Who is Entitled to a Land and Buildings Transaction Tax Exemption?
There are a number of situations that qualify for a LBTT exemption, where no tax needs to be paid and no return needs to be filed. You can be exempt from LBTT if:
- The interest in question is an exempt interest, namely a security interest such as the creditor’s interest in a standard security.
- Land or buildings may be gifted or the ownership transferred to another person for no 'chargeable consideration'.
- Acquisitions by the Crown.
- Residential leases and licences.
- Transactions in connection with a divorce.
- Transactions in connection with the dissolution of a civil partnership.
- Assent and appropriations by personal representatives.
- Variation of testamentary dispositions.
There are exemptions to these cases, for further information you can check the LBTT Legislation Guidance.
How much is the Land Transaction Tax (LTT) in Wales?
You must pay LTT if you buy a property or land over a certain price threshold in Wales.The amount of LTT you pay depends on:
- When you bought the property.
- Whether it’s residential or not.
- How much you paid for it.
There are different rules if you already own one or more residential properties, and you may need to pay the higher residential rates. However, if you’re replacing your main residence, the higher rates may not apply.
The following rates will apply when you buy a residential property (freehold or leasehold), to the portion of the price you pay in each band:
| Price Threshold | LTT Rate |
| The portion up to and including £180,000 | 0% |
| The portion over £180,000 up to and including £250,000 | 3.5% |
| The portion over £250,000 up to and including £400,000 | 5% |
| The portion over £400,000 up to and including £750,000 | 7.5% |
| The portion over £750,000 up to and including £1,500,000 | 10% |
| The portion over £1,500,000 | 12% |
For example, if you bought a house for £350,000, you would pay:
0% on the first £180,000 = £0
3.5% on the next £70,000 (the price between £180,001–£250,000) = £2,450
5% on the remaining £100,000 (the price between £250,001–£300,000) = £5,000
So, the total LLT payable on your property would be £7,450 (£0 + £2,450 + £5,000).
Land Transaction Tax for First-Time Buyers
There’s no first-time buyers' relief in Wales. But there are still some specific reliefs for:
- Buying more than one property (multiple dwellings).
- Moving property around a group structure.
- Charities buying property.
Land Transaction Tax for Buy-to-Let and Additional Properties
When you buy a residential property and you already own one or more residential properties in Wales, such as buy-to-let properties, you may need to pay the higher residential rates.
However, you can use your new property as your main home and not have to pay additional tax if you have sold the last main home you owned before you buy your new home or on the same day.
The following rates will apply to the portion of the price you pay in each band:
| Price Threshold | LTT Rate |
| The portion up to and including £180,000 | 4% |
| The portion over £180,000 up to and including £250,000 | 7.5% |
| The portion over £250,000 up to and including £400,000 | 9% |
| The portion over £400,000 up to and including £750,000 | 11.5% |
| The portion over £750,000 up to and including £1,500,000 | 14% |
| The portion over £1,500,000 | 16% |
For example, if you bought a house for £350,000, you would pay:
4% on the first £180,000 = £7,200
7.5% on the next £70,000 (the price between £180,001–£250,000) = £5,250
9% on the remaining £100,000 (the price between £250,001–£400,000) = £9,000
So, the total LLT payable on your property would be £21,450 (£7,200 + £5,250 + £9,000).
Land Transaction Tax for Mixed-Use Properties
As it happened in England and Northern Ireland, mixed-use properties are those with both residential and non-residential elements, such as a flat adjoining a shop, or a residential house on a working farm.
The Wales Government allows mixed-use properties to calculate their LTT using non-residential rates. The LTT bands for mixed-use and non-residential properties are as follows:
| Price Threshold | LTT Rate |
| The portion up to and including £225,000 | 0% |
| The portion over £225,000 up to and including £250,000 | 1% |
| The portion over £250,000 up to and including £1,000,000 | 5% |
| The portion over £1,000,000 | 6% |
For example, if you were purchasing a mixed-use property priced at £260,000, you would pay:
0% on the first £225,000 = £0
1% of the next £25,000 (the price between £225,001–£250,000) = £250
5% of the remaining £10,000 (the price between £250,001–£1,000,000) = £500
So, the LTT payable on your additional property would be £750 (£0 + £250 + £500).
Who is Entitled to a Land Transaction Tax Exemption?
There are a number of situations that qualify for a LTT exemption, where no tax needs to be paid and no return needs to be filed. You can be exempt from LTT if:
- Property is left to you in a will and you do not make any payment for the transfer of it.
- Property is transferred due to divorce or dissolution of a civil partnership.
- You buy a freehold property for less than £40,000.
For further information you can check the LTT Legislation Guidance.
When and How do you Pay Stamp Duty?
You need to pay your Stamp Duty Land Tax within 14 days and the LBTT and LTT within 30 days of completing the purchase of your new home by submitting a SDLT return to HMRC.
In most cases, a solicitor, agent, or conveyancer will file the forms and pay the tax on your behalf, with the amount payable as part of their fees (take a look at our mortgage fees guide for more information). They may also apply for any relief you are entitled to as part of the process. If you’re not sure if they will perform this task, it’s worth checking beforehand.
Should you need to file your own taxes, you can do this by filing a paper return and sending it by post — you need to order the forms first — or by using each online filing system. The different governments also provide detailed guidance on the methods of payment that they accept and how to pay.
It is important to remember that you still need to submit a Tax return even if you aren’t due to pay anything. However, you don’t need to file a return for freehold purchases involving transactions of less than £40,000 — there are a list of other exemptions to each tax to consider as well.
If you don’t pay your Taxes or return your form, you can be fined:
For the SDLT, in the first year, the fine will stand at 10% of the amount owed (capped at £300), but this increases to 20% for a second year and 30% if the Tax is not paid going into a third year. See HMRC’s guidance for full details of these penalties.
If your return of the LBTT is received late, it will depend on how late it is to determine which penalties may be applied. Tax not paid within 30 days of the date it is due to be paid, Tax not paid within 5 months of first late payment penalty date and Tax not paid within 11 months of first late payment penalty date stand at 5% of outstanding tax. See full details in the LBTT legislation guidance.
In the case of LTT, 1% of the amount of unpaid tax, unless it’s your second or further failure to pay the tax within a specified penalty period. After that you’ll have to pay an extra 5% of any unpaid tax if you failed to pay within the first 6 and 12 months.
Can Stamp Duty be added to my Mortgage?
Depending on your lender, you may be able to add the amount of taxes payable to your mortgage loan. But, as this involves borrowing more, it would both increase your loan-to-value (LTV) and the amount of interest you would need to pay. With a higher LTV, you may not be able to access the better mortgage rates, and with more interest, your monthly repayments would increase, and you’ll end up paying more for the Taxes amount than if you paid upfront.
The best course of action is to save up until you can afford those Taxes, as well as your deposit and other costs of applying for a mortgage. If you need advice on saving for a house deposit, take a look at our mortgage deposit guide, which contains everything you need to know. We also have a mortgage affordability calculator that you can use to see what size loan you will be able to take on.
Here at The Mortgage Genie we are committed to helping you purchase your dream home. Get in touch with us today to kickstart your home purchase journey. We can answer all your questions on Stamp Duty as well as the rest of the home buying process.
