Buying a house is an expensive business. There’s no getting away from it. As well as a sizeable deposit, you will need to shell out for professional fees, moving costs and, of course, Stamp Duty – or Stamp Duty Land Tax (SDLT) to give it its full name. But what is Stamp Duty? How much is Stamp Duty? How do you pay Stamp Duty and when is Stamp Duty due? So many questions and more! Let’s try and answer them all for you in this handy blog.
What is Stamp Duty?
Officially called Stamp Duty Land Tax (SDLT), it was originally introduced in the UK in 1694 as a way of raising much needed funds for the war against France. In a nutshell, it is a “property transaction tax” and it is applied any time a property is purchased with a value that is equal to, or more than, the current minimum Stamp Duty threshold.
The Stamp Duty is the responsibility of the buyer, not the seller and your Solicitor should ensure that the payment is made correctly and on time. If you own more than one property you will be subject to additional Stamp Duty.
In a nutshell, it is a “property transaction tax” and it is applied any time a property is purchased with a value that is equal to, or more than, the current minimum Stamp Duty threshold. Whether it’s a new home (new build), your new main residence or a second home.
How much Stamp Duty will you have to pay?
At the time of writing this (November 2023) Stamp Duty in England is calculated based on a banding system relating to the value of the property being purchased, with higher rates of stamp duty on more expensive properties. Currently there is no Stamp Duty payable for any property worth less than £250,000. Beyond that the Stamp Duty increases as follows:
- For a property worth up to £925,000, Stamp Duty of 5% will be owed on the portion from £250,001 to £925,000
- For a property worth up to £1.5million, Stamp Duty of 10% will be owed on the portion from £925,001 to £1.5milllion AND 5% will be owed on the portion from £250,001 to £925,000
- For a Property worth more that £1.5million, Stamp Duty of 12% will be owed on the portion from £1500001 and above AND 10% will be owed on the portion from £925,001 to £1.5milllion AND 5% will be owed on the portion from £250,001 to £925,000
**It’s important to mention that these are the current Stamp Duty brackets for England and Northern Ireland. Scotland and Wales have their own brackets.
Here are a few examples to help you get your head around it:
- If you are buying a property for £225,000 you will not need to pay any Stamp Duty (correct at time of writing)
- If you are buying a property for £775,000 you will not pay any Stamp Duty on the first £250,000 but you will need to pay 5% of the portion over £250,000. This would equate to 5% of £525,000 so total Stamp Duty owed would be £26,250.
- If you are buying a property for £1.1million you will not pay Stamp Duty on the first £250,000 but you will need to pay 5% on the portion from £250,000 to £925,000, PLUS 10% on the portion over £925,000. So you would be looking at 5% of £675,000 = £33,750 PLUS 10% of £175,000 = £17,500 giving you a grand total of £51,250.
Does everyone have to pay Stamp Duty?
Anyone who is purchasing a property in the UK will have to pay Stamp Duty unless they are a First Time Buyer buying a home to live in that is worth less than £425,000. If a First Time Buyer purchases a property of up to £625,000 they will not pay any Stamp Duty on the first £425,00 and will pay 5% on the remaining value.
Anyone buying a commercial property will still be required to pay Stamp Duty but the rates are calculated slightly differently. If the value of the property is up to and including £225,000, the Stamp Duty will be 0%. Properties over £225,000 up to and including £250,000 will pay 1% on the portion over £225,000. A commercial property worth £250,000 up to and including £1m will require a 5% Stamp Duty payment and any portion over £1m will pay 6%.
How do you pay the Stamp Duty you owe?
If you are buying a property, you will have enlisted the services of a conveyancing solicitor. They will be able to make the Stamp Duty payment for you assuming that you have given them the necessary funds to do so.
When will your Stamp Duty payment be due?
Buyers have 14 days from the completion of the property to make the Stamp Duty payment to HMRC. This is usually overseen by the solicitor.
So there we have it! A lot of information on Stamp Duty to take in but all important stuff. Of course, if any of this is confusing or raises any questions or concerns, we would always advise that you contact your solicitor who should be happen to explain everything you need to know.