What is stamp duty?
Stamp duty is a property transaction tax that you have to pay if you buy houses, land, flats, and other properties worth over £125,000. It is payable by those living in England and Northern Ireland. The rate payable ranges from 2% to 12% of the total purchase price. The rate you pay will depend on the value of the property, the purchase date, and whether you already own another property.
Why do we pay stamp duty?
As the name suggests, the payment of stamp duty was historically evidenced by a stamp that legalised property transactions and other documents and proved they were not counterfeit. Now, though a physical stamp is not always used, the same principle applies. It used to be paid at a fixed rate whatever the value of the property. Now, it is an ad valorem tax – a tax that is paid according to value. Let’s break down how it works.
UK stamp duty rates.
You pay stamp duty at the following rates if the property you are buying will be the only residential property you own. If you own another residential property, you will usually be charged an additional 3% on top of these rates.
| Property or lease premium or transfer value | SDLT Rate |
|---|---|
| Up to £125,000 | Zero |
| 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% |
Stamp duty for first time buyers.
First Time buyers don’t have to pay stamp duty if the property they’re buying is worth less than £300,000. If the property value falls between £300,000 and £500,000, you will have to pay stamp duty but at the reduced rate of 5%. If the price of the property exceeds £500,000, you won’t be able to claim any stamp duty relief.
Stamp duty for buy to let or second homes.
If you’re buying a second home or a property you intend to let out, the rules for stamp duty are different. On top of standard rates, you will be charged the following rates:
| Purchase price of property | 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% |
* These rates also apply if the property was purchased before 8th July 2020.
Stamp duty for shared ownership.
If you’re purchasing a property via shared ownership, you may be liable for SDLT. The property value and shared ownership scheme you are purchasing through will determine whether or not you have to pay. You can choose to do this as a one-off payment or in stages.
When do you have to pay stamp duty?
Stamp duty needs to be paid within 14 days of your completion date. This is the day when all the contracts have been signed and dated – usually the day you receive the keys to your new home! Typically, your solicitor or conveyancer will handle this for you and confirm that it has been paid. If you don’t pay within this time, you might be charged a fine with added interest.
Stamp duty exemptions.
There are some instances where stamp duty doesn’t have to be paid. Let’s run through what they are. The following property transactions are exempt from stamp duty:
- If, during a divorce or separation, one partner is transferring their share in a property to the other.
- If the property is given as a gift.
- If the property is inherited.
- If the property value is lower than the specified 0% rate value.