How Much is Stamp Duty?

Written on 6 September 2019 by Alice Colmer


How Much is Stamp Duty?

When buying a house there are several expenses you must account for, with Stamp Duty being one of the largest. Finding out how much Stamp Duty you need to pay and what these charges mean can get confusing. This blog will take you through the basics of Stamp Duty and explain all you’ll need to know.

What is Stamp Duty Tax?

Stamp Duty is a UK governmental tax that’s charged when you buy a property or a piece of land, also known as Stamp Duty Land Tax (SDLT). The amount you’re expected to pay is dependent on the value of the property you want to purchase, as well as the type of buyer you are. In most cases, first-time buyers are exempt from paying any Stamp Duty. 

How and When Do I Pay Stamp Duty Tax?

You pay Stamp Duty Land Tax once you’ve purchased land or property. Usually, your solicitor or conveyancer will deal with Stamp Duty on your behalf. They’ll do this by submitting your return and paying the amount due to HMRC, on the day of completion.
It’s good to be aware that as of March 2019, Stamp Duty must be paid within 14 days of completion on a property. It’s likely that you’ll be penalised if you don’t file your return within those 14 days.


Stamp Duty Relief

There are certain situations in which you may be eligible for Stamp Duty relief. These reliefs can reduce the amount of tax you pay.

You’ll be exempt from Stamp Duty if:

  • You’re a first-time buyer and you purchase property for £300,000 or less
  • A property is left to you in a will. You pay inheritance tax rather than Stamp Duty tax on inherited property
  • A divorce or separation in which a partner is transferring an interest of the property to the other as part of an agreement or court order
  • You purchased a freehold property for less than £40,000
     

How Much is Stamp Duty?

The amount of Stamp Duty you’ll pay depends on the value of the property you’re wanting to buy. Use our free Stamp Duty Calculator, to find out how much you’d be expected to pay on your property.

Standard Rate for First Time Buyers in England

If you’re a first-time buyer, purchasing your first residential property, you can claim full Stamp Duty relief on properties up to £300,000. You’ll also receive some relief on properties valued between £300,000 and £500,000. If you purchase a property above £500,000 you will not be eligible for relief. For joint applications, both parties must be first-time buyers for the relief to apply.

Property Value

SDLT Rate for First-Time Buyers 2019 - 2020

Up to £300,000

0%

£300,001 - £500,000

5%

Standard Rate for Previous Homeowners

The standard Stamp Duty rates, for those who have previously owned a property, vary depending on the price of the home. The purchase of any land or property above £125,000 will mean you’ll be eligible to pay Stamp Duty. Demonstrated in the table below, as the property value increases, so does the amount of Stamp Duty tax you’re likely to pay.

Property Value

SDLT Rate on Main Residence

Up to £125,000

0%

£125,001 - £250,000

2%

£250,000 - £925,000

5%

£925.001 - £1,500,000

10%

From £1,500,001

12%

Example

You’re purchasing a home for £400,000. The maximum SDLT rate you’ll be paying is 5%. But, your overall tax won’t just be 5% of the total value of £400,000. You pay different portions of the whole value, depending on what rates you cover.

You’ll pay:

  • 0% on the first £125,000 of the £400,000 = £0
    There is a zero tax to pay on the first £125,000.
  • 2% on the first £125,000 of the £400,000 = £2,500
    The next £125,000, which takes the cost of the property from £125,001 to £250,000 is taxed at 2%.
     
  • 5% on the next 150,000 of the £400,000 = £7,500
    The next £150,000, taking the cost from properties between £250,001 to £925,000 is taxed at 5%.
     
  • Total SDLT = £10,000

Standard Rate on Second Homes

If you’re buying a new residential property, on top of one you already own, you’ll usually have to pay 3% on top of the normal Stamp Duty rate. To find out more information about Stamp Duty on Second Homes read our detailed guide.

Standard Rate on Shared Ownership Properties

You still have to pay full Stamp Duty on shared ownership properties, even though you’re only buying a portion. For example, if you’re buying a 50% share of a property worth £180,000, rather than just paying Stamp Duty on your £90,000, you’ll have to pay Stamp Duty on the full £180,000.

The Future of Stamp Duty

As part of his electoral campaign, Boris Johnson proposed a range of changes that could shake up the property market. Including some interesting changes regarding Stamp Duty.

As part of his new plans, he states that he’s considering scraping Stamp Duty on properties worth less than £500,000.
Currently, you’re only exempt from Stamp Duty if your property is under £125,000, unless you’re a first-time buyer.  This would significantly benefit those who want to buy property between £125,00 and £499,999. With those purchasing a home close to the £500,000 exemption limit, it could potentially be saving them thousands of pounds.

One of the more radical changes Johnson suggested was to change who is expected to pay the Stamp Duty, making it the seller rather than the buyer. This proposed change would supposedly help buyers move up the property ladder, as they would be paying stamp duty on the property they’re selling rather than the more expensive one they’re buying. 

It’s still unconfirmed whether or not these plans will officially go ahead, but if they do there could be a major shift within the mortgage industry and a lot could change.

We highly recommend reading our full guide to Stamp Duty Tax 2019 for a clearer understanding on what Stamp Duty is and how it could possibly effect you in the future.  

Categories: General Mortgage Information, Tax, Alice Colmer

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