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What is stamp duty?

Most buyers have to pay stamp duty. Aside from your mortgage, stamp duty could be the biggest cost of buying a home.

A stamp duty calculator can help you estimate how much you’ll need to pay. It will take into account the price of your home and the stamp duty rate band it falls into.

Stamp Duty Land Tax (SDLT) is a tax in England and Northern Ireland. It usually applies to residential properties, or pieces of land, that cost more than £125,000.

First time buyers and those buying more than one property, may not have to pay stamp duty. (1)

Scotland and Wales have their own taxes that are equal to stamp duty.

You'll pay:

  • Land and Buildings Transaction Tax (LBTT) in Scotland

  • Land Transaction Tax (LTT) in Wales

Stamp duty holiday: No stamp duty on homes up to £500,000

If you buy a home for up to £500,000 you will not pay any stamp duty.

This "stamp duty holiday" will last until 31 March 2021. It's part of government plans to help the economy recover from coronavirus.

The stamp duty cut only applies if you're buying a house in England or Northern Ireland. In Scotland and Wales the stamp duty rates are still the same.

If you buy a £500,000 home between now and 31 March 2021, you would save £15,000 in stamp duty.

You could spend this money on increasing the size of your deposit or on home improvements. Putting down a bigger deposit could be a good idea as it could help you get a better mortgage deal.

If you buy a home for more than £500,000, you will pay 5% on the next £425,000 of the purchase price from £500,001 to £925,000.

The rates are still 10% and 12% for the last two bands (£925,001 to £1.5 million and above £1.5 million).

If you're buying a second home you will pay 3% on the first £500,000 of the purchase price, then 8% from £500,001 to £925,000. The usual rates of 13% and 15% apply for the last two bands.

They introduced first time buyer stamp duty relief in 2018. You could apply for a stamp duty refund if you bought your first house a few months earlier.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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How and when do I pay stamp duty?

You have to pay your stamp duty within 14 days of your move in date. If it’s not paid by then, you could risk a fine, or having interest added to the amount due. (2)

Often your solicitor deals with your stamp duty payment. It can help to know what stamp duty is, how it’s calculated, and when it’s due.

You pay stamp duty as a lump-sum on new properties, second homes, freehold and leasehold properties. As well as homes bought outright or with a mortgage.

When do you not need to pay stamp duty?

You do not need to pay stamp duty land tax if you're:

  • buying a property valued below the stamp duty threshold

  • transferring the deeds of your home to someone

How much is stamp duty in 2020?

Stamp duty in England and Northern Ireland

The standard rate bands for stamp duty are as follows*:

0% stamp duty on first £0 - £125,000 of property value

2% stamp duty on next £125,001 - £250,000 of property value

5% stamp duty on next £250,001 - £925,000 of property value

10% stamp duty on next £925,001 - £1.5 million of property value

12% stamp duty above £1.5 million of property value

*Figures accurate as of April 2020 for the April 2020 to April 2021 tax year

The stamp duty rate you’ll pay is not confined to just one of these bands. Each band applies to the equivalent portion of the property price. For example, if you buy a house for £300,000, the stamp duty you’ll pay will be:

  • The first £125,000 x 0% = £0

  • The next £125,000 x 2% = £2,500

  • The final £50,000 x 5% = £2,500

Total stamp duty = £5,000

It’s a bit complicated, especially on more expensive properties, so a stamp duty calculator can be useful.

Stamp duty for first-time buyers in England and Northern Ireland

If you’re a first-time buyer, you could get stamp duty relief on properties up to the value of £500,000.

If you buy a home up to the value of £300,000, you won’t have to pay any stamp duty at all.

If your property costs between £300,000 and £500,000, you won’t have to pay anything on the first £300,000. But you’ll have to pay a rate of 5% for the remaining part.

For example, on a property that costs £450,000, your stamp duty would be:

  • The first £300,000 x 0% = 0%

  • The remaining £150,000 x 5% = £7,500

Total stamp duty = £7,500

To be eligible for this discount:

  • all be first time buyers if involved in buying the property

  • your property cannot have a value of over £500,000

If you’re a first-time buyer and the property you’re buying is over £500,000, you’ll need to follow the standard rate bands.

Stamp duty in Scotland

In Scotland, to buy a single property you do not have to pay any tax on the first £145,000.

The following rates apply over the first £145,000:

  • 2% on the value of the property between £145,000 and £250,000

  • 5% on the part between £250,000 and £325,000

  • 10% on the part from £325,000 to £750,000

  • 12% on any value over £750,000

First time buyers in Scotland do not pay stamp duty on the first £175,000. 

Stamp duty in Wales

LTT is usually exempt on the first £180,000 of the property.

The following rates apply over £180,000:

  • 3.5% between £180,000 and £250,000

  • 5% on the part between £250,000 and £400,000

  • 7.5% on the part between £400,000 and £750,000

  • 10% within the next band up to £1.5 million

  • 12% over £1.5 million

There’s not currently any relief for first-time buyers in Wales. The higher tax-free threshold of £180,000 should make most first time buys tax-free. (3)

Using a stamp duty calculator

You can calculate stamp duty by:

  • stating if you're buying for the first time, your next home, or another property 

  • giving the value of the property you’re buying, and if it’s residential or commercial.

Some calculators may ask you for the date you plan to complete the sale.

The stamp duty calculator should then calculate the total Stamp Duty Land Tax you’ll need to pay. As well as a breakdown of how it calculated that figure.

There are a range of stamp duty tax calculators, including HMRC’s stamp duty calculator.

Your mortgage adviser can give you general information on the rates you need to pay. Mortgage advisers are not qualified to give tax advice.

If you need advice on tax, then speak to an independent tax and legal specialist.

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Buy-to-let stamp duty and stamp duty on a second property

Calculating stamp duty on second homes is different.

For second homes, you'll have to pay an extra 3% on the standard stamp duty rates. This is for properties over £40,000 but does not include mobile homes, houseboats, and caravans.

If you’re buying a new home and selling your old one, you’ll only need to pay the standard stamp duty rates.

If you do not sell your main property when you complete your new home, you'll have to pay the higher rates. This is because you'll own two properties.

You can get a refund once you’ve sold your original home as long as it’s within 36 months of when you first bought it.

Buying a leasehold property

Stamp duty applies on both leasehold and freehold properties. It is dealt with exactly the same way on either property.

Buying a commercial property

Calculating stamp duty on land and non-residential property is also different. This includes mixed-use land and property.

You’ll pay land tax on transactions over £150,000.

This is currently 2% of the property value from £150,000 to £250,000 and 5% on the value above £250,000.

Joint ownership and stamp duty relief

If you’re a first-time buyer of a shared ownership home, you do not have to pay stamp duty on the first £300,000 of a home worth up to £500,000.

This means all first-time buyers with a first home worth up to £300,000 is now exempt from stamp duty. (4)

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