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:
Please note: The advice on Stamp Duty Land Tax in this guide is only applicable to England and Northern Ireland. Scotland (Land and Buildings Transaction Tax) and Wales (Land Transaction Tax) each have their own taxes and advice is available elsewhere.
Stamp Duty Land Tax is the tax you’re liable to pay when you buy a property of a certain value in England or Northern Ireland. 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.
Stamp Duty applies to freehold purchases (property and land owned outright), leasehold purchases (property and land owned for the duration of the lease agreement with the freeholder), and shared ownership schemes. It also applies whether you buy with cash or a mortgage.
If you’re buying a residential property costing more than £125,000, you’ll need to pay SDLT (you’ll need to submit a return even if your property is valued under £125,000). This is the lowest threshold for the Tax, and once you’re purchasing a home valued above it, you will need to pay a percentage of the value to the Government. Should you be buying non-residential land or property, you will pay SDLT if the value is over £150,000.
However, the rules are different if you are a first-time buyer: you’ll only pay SDLT if you are buying a home valued at over £300,000, and even then, there is further relief available. We’ll look at Stamp Duty for first-time buyers in the next section of the guide.
There are also differences 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 additional and Buy-to-Let properties later in the guide.
There are 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; or
• 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.
Stamp Duty is calculated as percentages 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:
|Price of property (min–max)||Stamp Duty rate (only applied to part of price that falls within the band)|
|Over £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.
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 Budget 2017, 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).
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; or
• 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.
If you are planning on buying an additional residential property, like a second home, or 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:
|Price of property||Stamp Duty rate (only applied to part of price that falls within the band)|
|£0–40,000 (total price)||0%|
|£0–£125,000||3% (0% + extra 3%)|
|£125,001–£250,000||5% (2% + extra 3%)|
|£250,001–£925,000||8% (5% + extra 3%)|
|£925,001–£1.5 million||13% (10% + extra 3%)|
|Over £1.5 million||15% (12% + extra 3%)|
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).
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.
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:
|Price of property||Stamp Duty rate (only applied to part of price that falls within the band)|
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).
You need to pay your Stamp Duty Land Tax 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 Stamp Duty, you can do this by filing a paper return and sending it by post — you need to order the forms first — or by using HMRC’s online filing system. HMRC also provides detailed guidance on the methods of payment that they accept and how to pay.
It’s important to remember that you still need to submit a Stamp Duty 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 — HMRC has a list of other exemptions to consider as well.
If you don’t pay your SDLT or return your form, you can be fined by HMRC. 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.
Under the current system, it’s not possible to pay your Stamp Duty in instalments. It must be paid as a full lump sum when you complete the purchase of your new home.
Depending on your lender, you may be able to add the amount 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 Stamp Duty amount that if you paid it upfront.
The best course of action is to save up until you can afford Stamp Duty, 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.
Working out if you need to pay Stamp Duty Land Tax and how much you need to pay can be a challenge, so we hope this guide has provided you with the information you need.
To make life even easier, The Mortgage Genie can help you to calculate the possibilities around SDLT in advance, ensuring you’re taking out a mortgage loan that is completely affordable. Not only that, but we will help you through the whole process, as well as finding the best deals on the market.
If you’re a first-time buyer, home mover, or you’re looking at buy-to-let properties, our experienced team are on hand to help you with your purchase. Be sure to get in touch with us today if you have any questions about SDLT or anything else in this guide.
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