Stamp Duty Explained

Stamp Duty Land Tax when you buy property

England, Scotland and Wales each have their own versions of stamp duty. In Scotland, the Land and Buildings Transaction Tax is a progressive scale of charges levied on the majority of residential transactions of over £145,000. In Wales, the threshold is £125,000.

In England and Northern Ireland, 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.

Rates from 2017
If the purchase price of residential property 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% of the remaining purchase price, on a sliding scale.

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.

Residential Purchase Price Main Residence SDLT Rate Second Home Higher Rate
(>£40k)
Up to £125,000 0 % 3%
£125,001 – £250,000 2 % 5%
£250,001 – £925,000 5 % 8%
£925,001 – 1,500,000 10 % 13%
£1,500,001 or more 12 % 15%

So, if you sell your main residence and replace it with a new main residence home for £300,000, you will pay: 0% on the first £125,000, 2% on the band £125,000 to £250,000 and 5% on the remainder, equating to a total of £5,000 in stamp duty land tax.

However, if the property you are buying for £300,000 is not your main residence, you will pay: 3% on the first £125,000, 5% on the band £125,000 to £250,000 and 8% on the remainder, equating to a total of £14,000 in stamp duty land tax.

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).

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 land tax.

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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