Pearl Lemon Properties

Stamp Duty

The Basics

Stamp duty is an unavoidable additional cost when purchasing a home, whether it’s your first or fifth. Stamp duty, also known as stamp duty land tax, is a tax you’ll pay to HMRC on top of the amount you’ve agreed to spend on a property.

How much money do you need to set aside, and when do you have to pay it? Use our easy-to-follow guide to get up to speed.

 

Please Note: The Chancellor announced a Stamp Duty exemption for all properties up to the value of £500,000 in England and Northern Ireland beginning July 7, 2020, and lasting until June 30, 2021. The holiday will then be extended until the end of September 2021 to homes worth up to £250,000.

There will be a discount for second homes or Buy to Let properties, with only 3% Stamp Duty payable on the first £500,000/£250,000. The usual percentage will be applied above that amount.

Is stamp duty applicable throughout the United Kingdom?

Stamp duty land tax is due in England and Northern Ireland. Land and buildings transaction tax is levied in Scotland, while land transaction tax is charged in Wales.

When you buy a house or flat, the stamp duty land tax is usually due on the portion of the price above £125,000. However, stamp duty rates differ depending on whether you are a first-time buyer or have previously purchased a home.

First-time buyers are exempt from paying any tax up to a purchase price of £300,000, with a 5% tax applied to the portion of the purchase price between £300,001 and £500,000.

Even if you’re buying for the first time, if you spend more than £500,000 on a property, you’ll be treated as if you’ve bought a home before, at least when it comes to paying the stamp duty.

In general, on freehold properties, stamp duty will be paid as follows:

  • No tax up to £125,000.
  • The remaining £125,000 (from £125,001 to £250,000) 2%
  • The remaining £675,000 (from £250,001 to £925,000) 5%
  • The remaining £575,000 (from £925,001 to £1.5 million) 10%
  • The balance (the amount over £1.5 million)  8%
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UK Property

Leasehold properties

The rates you’ll pay are generally the same as those listed above. However, if you buy a property with a new lease, you may have to pay more stamp duty. HMRC can provide you with more information for your individual property buying situation.

Second-home stamp duties

If you’re buying an additional home – for example, as a buy-to-let or to renovate and ‘flip’ as an investment, you’ll have to pay an additional 3% stamp duty on top of the normal stamp duty.

When Stamp Duty Isn't Due

Stamp duty is not applicable to properties being purchased for less than £40,000. Stamp duty will be charged however on the full purchase price for properties costing between £40,000.01 and £125,000.

When does stamp duty have to be paid?

You have 14 days from the completion or date of entry, regardless of where you live in the UK, to pay your stamp duty or – outside England and Northern Ireland – other tax on the transaction. Otherwise, fines and interest charges may be owed.

As part of the conveyancing process, your solicitor should ensure that the stamp duty tax is paid on time and take that responsibility off your shoulders.

Stamp duty exemptions

There are very limited situations in which you may be exempt from stamp duty, usually when a share of the house (or equity) is being transferred from one person to another, for example when two people are getting a divorce. An exemption may also apply if you were left a share of a property in someone’s will. In all cases, however, you must contact a lawyer and HMRC before simply assuming you are exempt.

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Calculating Stamp Duty

For someone doing so for the first time, the issue of calculating stamp duty payable on a property they are considering may seem a tricky one, but it really isn’t. 

To calculate the approximate stamp duty you would need to pay on a property you can make use of a stamp duty calculator.