Stamp Duty - or Stamp Duty Land Tax (SDLT) in official terms - is charged to buyers in England and Northern Ireland when purchasing a residential property or piece of land that costs more than £500,000. This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.
When it comes to buying a home, there are a lot of expenses you need to take into consideration. Along with legal costs and agent fees, it is likely that you will also have to pay stamp duty or land tax. Here is everything you need to know about how much stamp duty or land tax you will have to pay on your next home.
On 8 July 2020, the Chancellor announced that there would be a temporary stamp duty cut until 31 March 2021. This means that you will only pay SDLT if purchasing a property that costs more than £500,000 rather than the previous threshold of £125,000, or £300,000 for first-time buyers.
How much is Stamp Duty Land Tax?
Purchase Price SDLT Rate SDLT Rate
(Main residence) (Additional Homes)
£0 - £500,000 0% 3%
£500,001 - £925,000 5% 8%
£925,001 - £1.5m 10% 13%
£1.5m + 12% 15%
SDLT is calculated based on the value of the home. The table explains how the rate you pay varies depending on the price of the property.
To help make sense of the price brackets, if you bought a property for £650,000 for example, the Stamp Duty payable would be:
0% on the first £500,000, and
5% on the remaining £150,000 (£7,500)
In total, you would pay £7,500.
Buy-to-let or additional properties
If you are purchasing a property in England and Northern Ireland costing £40,000 or more, which is not considered your main residence, you must pay an increased rate of tax (or additional dwelling supplement) of 3%.
Anything other than your main residence is classed as a ‘second home’ - this could be a holiday let, a property bought as an investment or somewhere you are helping another family member to buy - even if your main home is overseas. This charge does not apply to caravans, mobile homes, houseboats or plots of land.
Whilst Stamp Duty is charged on a tiered basis, the 3% surcharge effectively works as a slab tax. This means that, if you buy a second home with a purchase price of £650,000, the additional surcharge would be £19,500 (3% of the entire price). This is in addition to the £7,500 Stamp Duty bill that would need to be paid on a home of this value, bringing the total payable to £27,000.
It is important to remember that if the property you are buying replaces your main residence, you will not be liable for the surcharge, even if you own additional properties (such as a second home or a flat you rent out) at the same time. However, this can be a complex area and you should seek advice from a solicitor or conveyance.
Joint ownership and Stamp Duty
If you already own a property and then jointly buy a property with a friend or partner, before selling your existing main residence, the surcharge may still apply, regardless of whether your partner also owns a home or not. You may, however, be able to claim this back, as long as you meet the criteria terms.
What if I’m a first-time buyer?
The Temporary Stamp Duty Land Tax Cut announced on 8 July 2020 increased the threshold for paying SDLT for first-time buyers from £300,000 to £500,000. This will be in place until 31 March 2021.
How and when do I pay Stamp Duty Land Tax?
You must file an SDLT return and pay the tax within 14 days of taking possession of your new property (for transactions that took place on or before 28 February 2019 the time limit was 30 days).
In most cases, your solicitor or conveyancer should be able to help you with this but if not, you will need to contact HMRC directly to make the payment.
HMRC accept several different payment methods including by phone, online at your bank or building society, at the post office or you can pay by cheque. More info...
If you fail to make payment within 30 days, HMRC may charge you a penalty fee and/or interest.
Additional rate refunds
If you purchase a new home but there’s a delay in selling your previous residence, you will still be liable to pay higher Stamp Duty rates for additional properties as you’ll now own two properties.
However, you can request a refund for the amount above the normal Stamp Duty rates if:
You sell your previous main residence within three years, and
You claim the refund within three months of the sale of your previous main residence, or within 12 months of the filing date of your self-assessment tax return, whichever comes later.
Visit gov.uk details on how to apply for a refund of higher rates of stamp duty.
Are there any exemptions?
You may be eligible for tax relief in certain situations, which can reduce the amount you pay.
For example, SDLT doesn’t apply if you have been left the property in a will or receive it as a gift – however other taxes might apply (such as inheritance tax). You will also be exempt if the property has been transferred to you following a divorce, separation or the end of a civil partnership.
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