Stamp duty made simple

21 October 2019
If you’re new to the property ladder and you’re about to start the home buying process, it’s important you’re aware of the costs involved in buying a new home. 
 
The term stamp duty will probably sound familiar, and although you won’t need to know all the ‘ins and outs’ of stamp duty, it’s still important to understand what it is and how it’s going to affect you during your home buying journey.  Keep reading to find out all you really need to know about stamp duty.
 


What is stamp duty land tax?

 
In short, if you’re buying a residential home in the UK worth over £125,000, you’ll have to pay stamp duty land tax on your purchase.
 
Whether you’re buying outright or with a mortgage, stamp duty land tax will still apply.
 

How much is stamp duty?

 
There isn’t one standard stamp duty charge for every house in the UK. Stamp duty has several rate bands, and how much you pay will be calculated on the part of the property purchase price falling within each band.
 
Here is an example of buying a home worth £275,000:
 
On the first £125,000 0% £0
On the next £125,000 2% £2500
On the final £25,000 5% £1250
Total Stamp Duty Land Tax payable: £3750
 
*Residential leasehold properties are charged differently.

So, although it may sound like 'just another tax' to pay, the amount you'll be charged will depend on the property you buy. It's a good idea to find a stamp duty calculator online when you've found the home you'd like to reserve, so you can check your affordability before you reserve.
 

When to pay stamp duty

 
Usually, you have 14 days after the date you completed the purchase of your home (completion day/the day you move in) to pay your stamp duty land tax.
 
If you don’t submit your stamp duty land tax return within the 14 days, you could be charged a penalty of up to £200, and charged interest on the amount you have to pay.
 

How to pay your stamp duty

 
Usually, your solicitor will deal with your stamp duty and any payment due, although you can do it yourself. Although it could be your solicitor dealing with it, it’s still classed as your responsibility to ensure its paid on time.
 
You can send your stamp duty land tax return online or through the post. You can find out more about the ‘how’s, who’s and why’s’ of filling in your stamp duty land tax return on the Government website.
 
 

Stamp duty eligibility

 
First time buyer
 
If you’re buying your first home, you won’t have to pay any stamp duty unless your home is worth more than £300,000.
 
Stamp duty relief for first time buyers buying a house for £300,000 or less has been in place since November 2017.
 
If you’re a first time buyer and purchasing a home worth between £300,000 and £500,000, you’ll have to pay stamp duty land tax at 5% on the amount of the purchase price in excess of £300,000.
 
First time buyers who are purchasing a property for more than £500,000 will not be entitled to any relief and will pay stamp duty land tax at the normal rates.
 
 
Second steppers
 
If you’re buying an additional residential property over £40,000, you’ll have to pay an extra 3% in stamp duty on top of current rates.
*This increased rate doesn’t apply to caravans, mobile homes or houseboats.
 
Sometimes there is a delay in selling your previous home, which will affect the stamp duty you pay. If there is a delay in selling your previous home, you will have to pay a higher stamp duty rates as you will own 2 properties.
 
However, if you sell or give away your previous main home within 3 years of buying your new one, you can apply for a refund of the higher stamp duty land tax part of your stamp duty bill.
 
Shared Ownership homeowners
 
Since October 2018, first time buyers under shared ownership schemes can claim first-time buyers stamp duty relief on homes worth up to £500,000. If you purchased your home on or after 22nd November 2017, you’ll be eligible to claim back first-time buyers stamp duty relief.