If you’re buying a home in England or Northern Ireland costing more than £125,000, you’ll have to pay Stamp Duty Land Tax (SDLT) on your purchase. With the assistance of the Money Advice Service lets look at what is stamp duty and what does it mean to you.
What is Stamp Duty?
In England and Northern Ireland an individual is liable to pay Stamp Duty when buying a residential property, or a piece of land, costing more than £125,000 (or more than £40,000 for second homes!). This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.
If you’re buying a property in Scotland you will pay Land and Buildings Transaction Tax (LBTT) and in Wales Land Transaction Tax (LTT) instead of Stamp Duty.
If you’re buying in Scotland, you will pay Land and Buildings Transaction Tax (LBTT) instead. Learn more by visiting https://www.moneyadviceservice.org.uk/en/articles/land-and-buildings-transaction-tax-everything-you-need-to-know
Equally If you’re buying in Wales, you will pay Land Transaction Tax, again learn more by visiting https://www.moneyadviceservice.org.uk/en/articles/land-transaction-tax-everything-you-need-to-know
How much is Stamp Duty?
There are several rate bands for Stamp Duty.
Stamp Duty rates
Minimum property purchase price Maximum property purchase price Stamp Duty rate (applies only to the part of the property price falling within each band)
£0 £125,000 0%
£125,001 £250,000 2%
£250,001 £925,000 5%
£925,001 £1.5 million 10%
Over £1.5 million 12%
The tax is calculated on the part of the property purchase price falling within each band. For example, if you buy a house for £275,000, the Stamp Duty Land Tax (SDLT) you owe is calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £25,000 = £1,250
Total SDLT = £3,750
Stamp Duty on second homes
Buyers of additional residential properties, such as second homes and buy-to-let properties, will have to pay an extra 3% in Stamp Duty on top of current rates for each band.
This increased rate applies to properties bought for £40,000 or more. It doesn’t apply to caravans, mobile homes or houseboats.
If you buy a new main residence but there’s a delay in selling your previous main residence, you’ll have to pay the higher Stamp Duty rates as you’ll now own two properties but you can request a refund for the amount above the normal Stamp Duty rates if:
• you sell your previous main residence within three years, and
• you claim the refund within three months of the sale of your previous main residence, or within 12 months of the filing date of your self-assessment tax return, whichever comes later.
Stamp Duty relief for first-time buyers
An individual is usually classified as a first-time-buyer if they’re purchasing their only or main residence and have never owned a freehold or have a leasehold interest in a residential property in the UK or abroad.
If you’re a first-time-buyer in England or Northern Ireland, you will pay no Stamp Duty on properties worth up to £300,000. This means if you are a first-time-buyer, you will save up to £5,000. For properties costing up to £500,000, you will pay no Stamp Duty on the first £300,000. You will pay Stamp Duty on the remaining amount, up to £200,000.
If the property you are buying is worth over £500,000, you will pay the standard rates of Stamp Duty and will not qualify for first time buyer’s relief.
Joint ownership and Stamp Duty relief
If you’re married and jointly buying a property, then you both need to be eligible first-time buyers to get First Time Buyers Stamp Duty relief. Unmarried people can still get a reduction in Stamp Duty, if the only person named on the mortgage deed is a first-time buyer.
When do you have to pay?
You’ll need to submit a Stamp Duty Land Tax return and pay what you owe within 30 days of completing the purchase of your home - if you don’t submit a return and pay the tax within 30 days, HMRC might charge you penalties and interest.
When is Stamp Duty not payable?
You’ll automatically avoid Stamp Duty if you buy a property for less than £125,000.
But for many homebuyers this just isn’t possible.
There are other circumstances in which Stamp Duty is either not payable or can be reduced:
• Slightly over rate band. If the price is only just within a higher band, ask the seller or estate agent if they would accept a slightly lower price.
• Transfer of property in separation or divorce. If you’re divorcing or separating from your spouse or partner, there’s no Stamp Duty to pay if you transfer a proportion of your home’s value to them.
• Transfer of deeds. If you transfer the deeds of your home to someone else – either as a gift or in your will – they won’t have to pay Stamp Duty on the market value of the property. However, if you exchange properties with another person, you will each have to pay Stamp Duty on the property you receive based on its market value.
How to pay Stamp Duty
Usually your solicitor will deal with the Stamp Duty return and any payment due for you, although you can do it yourself. Either way, you’re responsible for making sure it’s all submitted on time. If the price of your new home is under £125,000, you must still submit a return (unless exempt) even though you won’t need to pay any Stamp Duty.
For more information on Stamp Duty visit either
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