Stamp Duty is a significant part of buying a property. In this guide, we’ll explain Stamp Duty and help you understand how it works.
You’ll have to digest quite a lot of information when you buy a property and Stamp Duty is one of the single biggest costs you’ll face. The amount will vary depending on your circumstances, but we’ll show you how to figure that out.
The Topics Covered in this Article Are Listed Below:
- What Is Stamp Duty Tax?
- Who Pays Stamp Duty?
- Stamp Duty Rates Explained
- Calculating Stamp Duty Tax
- Implications of Not Paying Stamp Duty Tax
- How To Pay Stamp Duty Tax
- Recent Changes to Stamp Duty Tax
- Do You Pay Stamp Duty on Shared Ownership Properties?
- Do You Pay Stamp Duty on New Build Properties?
- Can You Avoid Paying Stamp Duty?
- Claiming a Stamp Duty Refund
What Is Stamp Duty Tax?
This guide has been produced for information purposes only. As a mortgage broker, we're not able to offer tax advice.
Stamp Duty is a UK property tax you pay when you purchase a property or a piece of land. Otherwise known as Stamp Duty Land Tax or SDLT, it applies when people buy properties over a certain price in England and Northern Ireland – Scotland and Wales have slightly different schemes but the principles remain the same. The amount you pay depends on the purpose and value of the property you want to purchase, as well as the type of buyer you are - e.g. first-time buyer, previous homeowner, or landlord.
There are a few misconceptions surrounding Stamp Duty, but that’s just because not everyone knows that much about it - especially those who haven’t really dealt with the property market before, or for many years.
It’s important to dispel these misconceptions from the offset.
So, if you’re new to this, remember these points:
- The buyer of a property, not the seller, pays Stamp Duty. You never pay Stamp Duty when you sell. You may however have to pay Capital Gains Tax when you sell a property that's not your main residence
- You can't deduct Stamp Duty from Income Tax, even on buy-to-let properties. However, you can deduct it from your taxable gains to reduce the Capital Gains Tax you pay when you sell a property
- Stamp Duty exemption areas don’t exist. Whether you qualify for an exemption depends on your situation and the value of your property
- You don’t pay VAT on Stamp Duty as it’s a tax in itself. Also, you don't pay VAT on the purchase of a property
When and How Do You Pay Stamp Duty?
You pay Stamp Duty Land Tax when you purchase land or property. HMRC must receive payment of Stamp Duty within 14 days of completion. To pay, you simply fill out an SDLT return and send it to HMRC. Your solicitor normally handles this for you at the same time they manage the transaction and submits the money to HMRC after completion.
Why Do You Pay Stamp Duty?
Buying a property can be expensive, so it may be disheartening when additional costs like Stamp Duty start to pile on. Learning what Stamp Duty is for won’t reduce the cost, but at least you’ll understand why you have to pay it.
The original reason we used to pay Stamp Duty was to cover the cost of the legal documents required when you purchase a property. The name comes from the physical "stamp" of approval that the Government used to impress upon your paperwork. Most documents are digital now and don’t require an actual stamp, but you still pay Stamp Duty.
Nowadays, Stamp Duty is normally more than is needed to cover the costs of the documents – the Government mainly uses SDLT as a means of gathering revenue, rather than simply processing paperwork.
An example of a document you need is a Certificate of Land Ownership, which officially transfers the ownership from the previous occupier to you. HMRC will only issue this to you upon the receipt of Stamp Duty.
Who Pays Stamp Duty?
Almost everyone who purchases a property above a certain value pays Stamp Duty. There are certain exceptions, but whether you qualify depends on what kind of buyer you are.
You pay normal Stamp Duty when:
- You purchase a main or second residential property, buy-to-let or piece of land worth over £250,000
- You purchase a new main residence to replace your previous one – this doesn’t include remortgaging
- You previously owned a property, but sold it and now rent or live with friends or family, and are buying another property
- You marry and then buy a property with your partner – even if one of you is a first-time buyer
- You buy a shared ownership property
- You’re a first-time buyer and you purchase a property valued over £625,000
- You purchase a non-residential property above £150,000
- You buy mixed-use land or property above £150,000
- You’re being added to a mortgage and title deeds – this is considered as "buying" a share of property or land
You also pay a Stamp Duty surcharge – otherwise known as Additional Stamp Duty – when:
- You purchase a second residence
- You’re a private landlord and you purchase a buy-to-let
- You purchase a buy-to-let through a limited company
You won't pay any Stamp Duty at all if you're a first-time buyer and you purchase a main residential property up to £425,000. If you buy a property valued at up to £625,000 and you're a first-time buyer, you won't pay any Stamp Duty on the first £425,000 of the property but will on the remaining amount up to £625,000. If you buy a property for over £625,000, you'll pay Stamp Duty at the normal rates and not receive any first-time buyer discount.
Exemptions and Relief
You’re exempt from Stamp Duty if:
- You receive land or property ownership in exchange for any payment or other consideration as stipulated by HMRC - e.g. through divorce
- A property is left to you in a will - instead of paying Stamp Duty on inherited property, you pay Inheritance Tax
There are Stamp Duty relief options for:
- People purchasing multiple dwellings where a transaction, or several linked transactions, include freehold or leasehold interests in more than one dwelling
- Situations where a building company buys an individual’s home and the individual buys a home from the building company
- Employers that purchase an employee’s home because they’re moving with their work
- Compulsory purchases, such as when a council purchases a property to sell it on to a property developer
- Instances where a property developer is subject to planning obligations
- There is a transfer of property between companies
- Charities that purchase land and property for charitable purposes
- Right to Buy properties where a residence is sold at a discount by a public-sector body or there’s a Preserved Right to Buy – the Stamp Duty on Right to Buy properties is worked out on the discounted price the buyer pays
- Certain situations in which registered social landlords buy land or property
Stamp Duty Rates Explained
The amount of Stamp Duty you’ll pay depends on the value and purpose of the property you want to buy.
If you’re buying a main residence and you’re a previous/current homeowner:
You’ll pay Stamp Duty at the standard rates. This includes people who've previously owned a main residence anywhere in the world but don’t anymore and people replacing their current residence with a new one.
|Property Value||SDLT Rate 23/09/2022 - 31/03/2025|
|Up to £250,000||0%|
|£250,001 - £925,000||5%|
|£925,001 - £1,500,000||10%|
You’re purchasing a new home for £700,000. The maximum rate of Stamp Duty you’ll pay is 5%, but you don’t pay 5% on the total value of £700,000. You pay Stamp Duty on different portions of the whole value at the corresponding rates.
- 0% on the first £250,000 of the £700,000 = £0
- 5% on the final £450,000 of the £700,000 (the portion from £250,001) = £22,500
- Total SDLT = £22,500
If you’re buying a main residence and you’re a first-time buyer:
You pay Stamp Duty at the normal rates but you don't pay any Stamp Duty on the first £425,000 of the purchase price.
|Property Value||SDLT Rate 23/09/2022 - 31/03/2025|
|Up to £425,000||0%|
|£425,001 - £625,000||5%|
You’re buying your first home for £500,000. The maximum rate of Stamp Duty you’ll pay is 5%; it’s also the only Stamp Duty you’ll pay.
- 0% on the first £425,000 of the £500,000 = £0
- 5% on the remaining £75,000 of the £500,000 = £3,750
- Total SDLT = £3,750
If you purchase a property priced at over £625,000 you'll follow the same rules as previous/current homeowners.
If you’re buying a second residence or a buy-to-let:
You’ll pay a 3% Stamp Duty surcharge called Additional Stamp Duty on top of the standard Stamp Duty rate. You can find more information in our guide: Stamp Duty on Second Homes.
If you’re a buying a non-residential property or mixed-use land:
You pay Stamp Duty on any property above £150,000.
|Property Value||SDLT Rate for Non-Residential and Mixed-Use Land 06/04/2023 - 05/04/2024|
|Up to £150,000||0%|
|£150,001 - £250,000||2%|
Non-residential property includes:
- Commercial property - e.g. shops, offices, etc.
- Agricultural land
- Any land or property that isn’t a residence
- 6 or more residential property bought as part of a single transaction
A mixed-use property is one with both residential and non-residential elements - e.g. a flat above a restaurant.
You’re buying commercial property for £300,000. The maximum rate of Stamp Duty you’ll pay is 5% but this is only for the portion of your property value over £250,000 - i.e. £50,000. You pay some Stamp Duty at 2% and some at 5%.
- 0% on the first £150,000 of the £300,000 = £0
- 2% on the next £100,000 of the £300,000 (the portion from £150,001 - £250,000) = £2,000
- 5% on the final £50,000 of the £300,000 (the portion from £250,001) = £2,500
- Total SDLT = £4,500
CALCULATING STAMP DUTY TAX
If you’re looking for an easy way to calculate how much Stamp Duty tax you’ll have to pay, you can use our simple calculators. These can help you work out the SDLT for a wide range of scenarios. All you need to know is the value of the property you’re buying and a few basic details such as whether you’re a first-time buyer, if this is a residential property, etc.
- For standard residential properties, try our Stamp Duty Land Tax Calculator
- If you’re a first-time buyer, see our First-Time Buyer Stamp Duty Calculator
- If you're a landlord and are buying a buy-to-let property, use our Buy-to-Let Stamp Duty Calculator
Knowing what Stamp Duty rate you’ll be paying can help you budget better for your new property.
Now you’re ready for your next step, speak to our experts and we’ll help you compare thousands of mortgage deals from across the market.
IMPLICATIONS OF NOT PAYING STAMP DUTY TAX
Stamp Duty is a tax that must be paid. If you don’t pay the full Stamp Duty Land Tax due to HMRC by the deadline, you’ll face a fine. You’ll have to pay the full original Stamp Duty amount as well as any interest that has accrued since the deadline has passed.
HOW TO PAY STAMP DUTY TAX
You need to pay Stamp Duty within 14 days of the completion of the property purchase. To do this yourself, first you need to submit a return to HMRC. Then you’ll have to transfer the funds.
Your conveyancer, agent or solicitor helping with the purchase will often submit the tax return on your behalf. They’ll add the Stamp Duty owed to their fees, so you can pay all your fees and tax conveniently in one transaction. Otherwise, you can contact HMRC directly to sort out your Stamp Duty payment.
RECENT CHANGES TO STAMP DUTY TAX
New Stamp Duty rates were last introduced in September 2022. This raised the standard SDLT threshold for 0% Stamp Duty to £250,000 from £125,000. Prior to this, there was a 2% Stamp Duty charge on properties costing between £125,000 and £250,000.
The first-time buyer Stamp Duty Exemption was also raised from £300,000 to £425,000. The maximum purchase price for a property that would allow a first-time buyer to qualify for the exemption was also raised from £500,000 to £625,000.
The new Stamp Duty policy is only currently set to run until March 2025, when there could be more changes. This higher threshold makes it easier for people to buy properties without having to pay so much tax.
DO YOU PAY STAMP DUTY ON SHARED OWNERSHIP PROPERTIES?
You still pay Stamp Duty on shared ownership properties even though you only buy a portion. In fact, you pay Stamp Duty at the current rates on the total value of the home.
You’re buying a 50% share in a property with a market value of £300,000 for £150,000 and you're not a first-time buyer. You have to pay Stamp Duty on the full £300,000, not your £150,000 share.
- 0% on the first £250,000 = £0
- 5% on the next £50,000 = £2,500
- Total SDLT = £2,500
Do You Pay Stamp Duty on New Build Properties?
You pay Stamp Duty on new builds like you would on any other residential property, but many people think you don’t. There’s no exemption criteria specifically relating to new build properties.
Can You Avoid Paying Stamp Duty?
Looking for tips on how to avoid Stamp Duty isn’t advisable. It’s a tax you simply have to pay. You may be fortunate enough to qualify for certain exemptions. If not, remember that Stamp Duty avoidance schemes aren’t the same thing. They’re also often unreliable. If they’re deemed as being against HMRC rules, then you’ll likely have to pay the Stamp Duty anyway – plus any penalties or charges incurred.
It’s our duty as a mortgage broker to protect our clients, which is why we advise you to speak with a qualified accountant about tax.
Claiming a Stamp Duty Refund
You can only reclaim Stamp Duty if you meet specific eligibility criteria.
You may be able to claim a Stamp Duty refund if you purchased a new main residence without selling your previous residence, but then sold that previous residence within 3 years. The refund would only be for the additional 3% surcharge for a second home, not the standard SDLT amount. Find out more in our guide: Stamp Duty on Second Homes.