What is stamp duty?
Stamp Duty Land Tax (SDLT) is the tax that must be paid when you purchase a property or a piece of land. The amount of money required for stamp duty depends on the overall price of the property as well as factors like whether it is residential or non-residential and whether or not you are a First Time Buyer.
Stamp duty rates & thresholds
The following rates apply to England and Northern Ireland.
Stamp duty for first-time buyers
Effective from 23rd September 2022:
| Property Value | Stamp Duty Rate |
|---|---|
| Up to £425,000 | 0% |
| £425,001 - £625,000 | 5% |
| £625,000+ | Normal SDLT rates apply |
Buying your first property:
If you’re buying your first property, you are eligible for tax relief up to the value of £625,000, this means that you’ll pay:
- 0% Stamp Duty up to £425,000
- 5% Stamp Duty between £425,001 - £625,000
If the price is over £625,000, then you’re not eligible to claim the SDLT relief.
How to calculate:
If you’re a first-time buyer and buy a property for £500,000, then you’ll pay:
- 0% up to £425,000 = 0
- 5% of the remaining £75,000 = £3,750
- Total SDLT = £3,750
Stamp duty for buyers replacing primary residence
Effective from 23rd September 2022:
| Property Value (£) | Stamp Duty Rate |
|---|---|
| Up to £250,000 | 0% |
| £250,001 - £925,000 (The next £675,000) | 5% |
| £925,001 - £1,500,000 (The next £575,000) | 10% |
| £1,500,000+ | 12% |
Replacing your main residence:
When you purchase a new primary residence to replace your existing property, you're exempt from the additional 3% Stamp Duty Land Tax (SDLT). This exemption applies as long as your previous main home has been sold before completing the purchase of the new one.
If you buy a new main residence without selling the previous one, you'll incur higher stamp duty charges due to owning two properties simultaneously.
However, there's an opportunity to request a refund on the extra stamp duty paid if your former primary residence is sold within three years. For more information on applying for a refund, visit gov.uk
How to calculate
If you buy a new main residence for £500,000, you’ll pay:
- 0% up to £250,000 = £0
- 5% of the remaining £250,000 = £12,500
- Total SDLT = £12,500
Stamp Duty for second home buyers or Buy-to-Let landlords:
Effective from 23rd September 2022:
| Property Value (£) | Stamp Duty Rate |
|---|---|
| Up to £250,000 | 3% |
| £250,001 - £925,000 (The next £675,000) | 8% |
| £925,001 - £1,500,000 (The next £575,000) | 13% |
| £1,500,000+ | 15% |
If you buy a property as a second home or a buy-to-let, you will incur a 3% surcharge on the existing rates (as shown above).
How to calculate:
If you buy a property for £500,000, you will have to pay:
- 3% of £250,000 = £7,500
- 8% of the remaining £250,000 = £20,000
- Total SDLT = £27,500
Stamp duty for non-UK residents
Effective from 23rd September 2022:
| Property Value (£) | Stamp Duty Rate |
|---|---|
| Up to £250,000 | 2% |
| £250,001 - £925,000 (The next £675,000) | 7% |
| £925,001 - £1,500,000 (The next £575,000) | 12% |
| £1,500,000+ | 14% |
For Stamp Duty Land Tax (SDLT) purposes, you're considered a non-UK resident if you haven't spent at least 183 days (approximately 6 months) in the UK in the 12-month period leading up to your property purchase. If you’re considered a ‘non-UK resident’ then you will have to pay a 2% surcharge if you’re buying a residential property in England & Northern Ireland. For more information on how non-resident status works in relation to stamp duty, see the gov.uk website
How to calculate:
If you buy a property for £500,000, then you’ll have to pay:
- 2% of £250,00 = £5,000
- 7% of the remaining £200,000 = £17,500
- Total SDLT = £22,500
How to pay stamp duty
Understanding how to pay Stamp Duty Land Tax (SDLT) is crucial. To ensure you meet your tax obligations without any hassle, make sure to follow this process:
- Calculation of SDLT: Your solicitor, conveyancer, or legal advisor will usually calculate the amount of SDLT due based on the purchase price of your property.
- Filing SDLT Return: Regardless of whether SDLT is due, an SDLT return must be filed with HMRC. Your solicitor or conveyancer typically takes care of this as part of their conveyancing duties. The return must be submitted and the tax paid within 14 days of completion of the property purchase.
- Making Payment: The SDLT can be paid in several ways, including direct bank transfer, cheque, or sometimes through an online system, depending on the services provided by your solicitor or conveyancer. It's important to ensure the payment is made within the 14-day window to avoid penalties and interest.
- Confirmation: Once the SDLT return has been filed and the payment made, HMRC will issue a SDLT5 certificate. This document is proof that you've paid your stamp duty and is required to legally register your property with the Land Registry.
Important considerations:
- Who pays?: The responsibility for paying SDLT falls on the buyer of the property. Your solicitor or conveyancer will usually manage the payment but it’s the buyer's responsibility to ensure it's paid on time.
- Late payment penalties: Failing to file the SDLT return or pay the tax within the 14-day deadline can result in penalties and interest charges from HMRC.
- Refunds and adjustments: If you overpay SDLT due to an error or you're eligible for a refund (for example, if you sell your old main residence within 36 months of purchasing a new one and had paid the higher rates), you can apply for a refund from HMRC.