Stamp Duty Explained

Stamp Duty Land Tax when you buy property

Scotland has its own version of stamp duty. The Land and Buildings Transaction Tax is a progressive scale of charges levied on the majority of residential transactions of more than £145,000.

In England, Northern Ireland and Wales you will pay Stamp Duty Land Tax (SDLT) on residential property such as houses, flats, other buildings and land. 

You will pay whether you are using your own money or raising a mortgage and whether the property is freehold or leasehold.  You will also pay if you buy a new or existing leasehold, or buy property through a shared ownership scheme, or if land or property is transferred to you for payment.

There are different rates for residential and non-residential/mixed-use property.

Under the previous system (up to April 2017): You would have paid 1% on a property between £125,000 and £250,000, between £250,000 and £500,000 you would pay 3%. So for a house purchased for £300,000: because the purchase price is over £250,000, you would have paid 3% on the entire purchase price, despite only being £50,000 above the threshold. Thus, you would have paid £9,000 in stamp duty.

New Rates from April 2017
If the purchase price is £125,000 or less you won’t pay any Stamp Duty Land Tax at all. If it’s more than £125,000, you will pay between 1 and 12 per cent of the remaining purchase price, on a sliding scale.

Residential Purchase Price Rate of Stamp Duty Land Tax
Up to £125,000 0 %
£125,001 – £250,000 2 %
£250,001 – £925,000 5 %
£925,001 – 1,500,000 10 %
£1,500,001 or more 12 %

So, if you purchase a house for £300,000: you will pay 0% for the first £125,000, 2% on the next £125,000 and 5% on the remaining £50,000.  Thus, you would pay £5,000 in stamp duty.

Calculate how much you will pay on the HMRC Stamp Duty Land Tax calculator

First time buyers
First-time buyers no longer benefit from a higher threshold of SDLT, and must pay the same as everyone else.  The Money Advice Service has information on government schemes for helping first-time buyers on its website.

Exceptions
There are several exceptions to these rates, including the purchase of multiple dwellings (i.e, you are buying five properties) and the purchase of Right to Buy properties.

If no money (or ‘consideration’) changes hands (for instance if you have inherited the property or it is transferred to you through divorce) then you will pay no SDLT.  However, you will have to pay SDLT if you exchange properties with another person (at a rate determined by its market value).

Stamp duty on second homes and buy-to-let properties attract an additional 3 per cent on top of the new bands for properties purchased for over £40,000.

Read the HMRC guidance on exemptions.

Non-residential and mixed use land and property

The rates for the freehold sale and transfer of non-residential property are different and transactions below £150,000 are exempt.  You will pay 2% on the first £100,000 and 5% on any remaining amount, so a commercial property purchased for £300,000 would pay £4,500 in stamp duty.

 

More information can be found on the HMRC website. We recommend that you check the accuracy of these rates and guidelines which may have changed since this article was written by contacting Her Majesty’s Revenue and Customs.

Read more on Stamp Duty Land Tax on the GOV.UK website.

 

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