Stamp duty explained

By Lauren Burns

Stamp duty has always been difficult to understand, but has become even more complex in the past few years. Changes were introduced in December 2014 so that different rates of stamp duty are applied to portions of the property price. A new rate of tax was introduced in April 2016 for the purchase of an additional property, and then an exemption was created for first time buyers in November 2017. So understandably, people are often confused about how much stamp duty they will have to pay.

The ‘standard’ rate of stamp duty

The ‘standard’ rate applies to someone who is not a first time buyer and is selling their current main residence and purchasing a new property which will be their main residence. It also applies to someone who has owned a property previously but currently owns no property. The rates are as follows but it should be noted that you do not pay a single rate for the entire price of a property. Stamp duty is paid at different rates on portions of the price according to the following:

Purchase price bands (£)

Percentage rate (%)

Explanation

 Up to 125,000

0%

Nothing paid on the first £125,000

125,001 to 250,000

2%

2% on the next £125,000

 250,001 to 925,000

5%

5% on the next £675,000

925,001 to 1,500,000

10%

10% on the next £575,000

Above 1,500,000

12%

12% on the rest (above £1.5 million)

Example If you buy a property for £275,000, you’ll pay £3,750 of SDLT. This is made up of:

  • nothing on the first £125,000
  • £2,500 on the next £125,000
  • £1,250 on the remaining £25,000


Stamp Duty for First Time Buyers

Purchasers who meet the first time buyer criteria are exempt from Stamp Duty on properties up to £300,000. If they buy a property up to £500,000 they will pay no Stamp Duty on the first £300,000 and only pay on the remaining amount.  You will not need to do anything to qualify for this exemption – your conveyancing solicitor will ask you the relevant questions to make sure that you meet the appropriate criteria, which is as follows:

  • You cannot have ever owned a property, even if you have now sold it (this includes inheritance)
  • You can own commercial property
  • You cannot have owned property abroad
  • If it is a joint purchase, both partners must be first time buyers
  • You are buying a home that you will live in
  • The purchase property is below £300,000 (for no stamp duty at all)
  • The purchase property is under £500,000 (you will only pay stamp duty on the amount over £300,000)
  • The purchase property is not in Scotland or Wales.


Stamp Duty for Buy-to-Let/additional properties

If you are not replacing your main residence, which you are selling (or have sold within the 3 years prior to this purchase), and you are buying an additional property valued at £40,000 or more, you will have to pay an extra 3% in Stamp Duty. This includes Buy-to-Let landlords and those buying second homes and holiday homes. It also includes someone who does not own their current main residence but owns at least one residential property that they don’t live in.

It is important to note that if you purchase a new main residence before you have sold your current main residence you will also have to pay the additional 3% SDLT. If you are unable to sell your first home within 3 years months of buying your new property, then you will not be entitled to reclaim the 3% SDLT surcharge.

Purchase price bands (£)

Percentage rate (%)

 Up to 125,000

3%

125,001 to 250,000

5%

 250,001 to 925,000

8%

925,001 to 1,500,000

13%

Above 1,500,000

15%

Example If you buy a property for £275,000, you’ll pay £12,000 of SDLT. This is made up of:

  • £3,750 on the first £125,000
  • £6,250 on the next £125,000
  • £2,000 on the remaining £25,000

One of the easiest ways to work out how much Stamp Duty you will have to pay is by using the online calculator at https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro which will guide you through the relevant criteria and give you the total payable and a breakdown of how it is calculated.

If you are buying a property in Northern Ireland and require a conveyancing solicitor to handle the legal process for you contact Wilson Nesbitt by clicking here.