Guide to Stamp Duty

What exactly is stamp duty and how much should you pay? This guide from haart will answer your questions and help you prepare for paying stamp duty when you move or buy property.

What is stamp duty land tax?

Stamp duty, also known officially as stamp duty land tax (SDLT), is one of the biggest additional costs you will have to consider when you move home or buy property. Here is a full list of these costs. Stamp duty is one of the oldest continuous types of tax in the UK, and has been through some changes since it was first introduced in 1694. Stamp duty is essentially a tax you pay when you buy property or land in the UK that is valued above a certain amount.

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How much is stamp duty?

Stamp duty is not a single set figure, which is why it can sometimes get a little confusing. The amount you pay varies depending on the price of the property being bought, and where it is in the UK. There are several ‘rate bands’ for Stamp Duty – a little like the different bands of council tax. There is a similar tax in Scotland and Wales, but there are differences with the rules in England and Northern Ireland.

How is stamp duty calculated?

Stamp duty is calculated on the part of the property purchase price falling within each band. If someone has purchased property before (therefore no longer a first-time buyer), stamp duty rates in England and Northern Ireland are as follows:

• 0% on property valued up to £250,000
• 5% on property valued between £250,001 - £925,000
• 10% on property valued between £925,001 - £1,500,000
• 12% on any property valued above £1,500,001+

How much is stamp duty on a second home?

If you already own a property, and purchase an additional property, the rate of stamp duty you pay is higher. An extra 3% is levied at each of the standard bands shown above, so if you were buying a property for £450,000, you would be paying stamp duty of 11% (3% up to £250,000, 8% between £250,001-£925,000).

Do you pay stamp duty on new builds?

Yes, stamp duty is still applicable to new build properties. Some new build property companies may run offers where the value of the stamp duty is discounted (the developer effectively paying the SDLT), but there is no difference to the threshold band rates. What sometimes happens is that when you buy a new build, the basic property will be valued separately to the fixtures and furnishings that are added by the buyer. On its own the property may have been below £250,000, for example, but with the added extras it tips the total value into the 5% SDLT band.

Do you pay stamp duty on inherited properties?

No, you don’t pay stamp duty on properties you inherit, as part of a deceased person’s estate. This is because inheritance is legally considered a transfer of property, rather than a transaction. The only circumstance in which might have to pay stamp duty on an inheritance is if there is an outstanding mortgage on the property. There also may be tax implications if you already own another property, or are thinking about buying for the first time. In the latter circumstances you would not qualify for the first time buyer SDLT rates, because you now own the inherited property.

Do you pay stamp duty on gifted properties?

No, SDLT does not apply to properties that are gifted. The only exception is if the property being gifted has an outstanding mortgage that exceeds a taxable stamp duty band (eg. higher than £250,000). Stamp duty is payable if the person receiving the gift already owns another home and is either using the gifted property as a second home or renting it out.

Do you pay stamp duty on buy to let?

Yes, and landlords have to pay more. Landlords must pay an extra 3% of stamp duty when they purchase a buy-to-let property in England and Northern Ireland.

Do first time buyers pay stamp duty?

Yes, but the rates are lower in England and Northern Ireland than the standard stamp duty thresholds. This is to help first-time buyers get onto the property ladder. As a first-time buyer, you do not pay any stamp duty on a property worth up to £425,000. The stamp duty rates for first-time buyers in England and Northern Ireland are:

• 0% on property valued £0 - £425,000
• 5% on property valued between £425,001 - £625,000
• 8% on property valued between £625,001 - £925,000
• 10% on any property valued above £925,001 - £1,500,000
• 12% on any property valued above £1,500,001

When do you pay stamp duty?

You pay stamp duty at the point of purchasing a property. SDLT must be paid within 14 days of the completion date. Your conveyancer or solicitor will usually include your stamp duty as part of the completion payment. You will be fined by HMRC if you have not filed a stamp duty return before the 14 day deadline, and may be charged interest.

Do you pay stamp duty when selling a house?

No, you don’t pay stamp duty when selling a house. You may be buying a house at the same time as selling one, in which case you will pay stamp duty on the purchase.

Can you add stamp duty to a mortgage?

Yes, you can borrow the funds to pay your stamp duty and add this to your mortgage, but you will be paying interest on this amount for the term of the mortgage. If you can afford to pay the stamp duty from your own funds, no interest will be accrued.

Can you pay in instalments?

No, stamp duty has to be paid in full within 14 days of your completion date. Stamp duty cannot be spread out over a payment period.

 Is there VAT on SDLT?

No, you don’t pay VAT on stamp duty. SDLT is a tax in itself on land and property purchases.

Can you avoid paying stamp duty?

There are certain exemptions and circumstances where you do not have to pay stamp duty, or can get relief on paying the full amount. These include:

• Property is left to you in a will
• Property is transferred because of divorce or separation
• Property purchased is over the £250,000 price band and the seller agrees to accept a lower offer
• Property is given as a gift or transferred with no money or other payment exchanging hands
• Property is moveable, so for example, a holiday lodge or motorhome
• Property is a houseboat (unless it comes with a garden) as only purchases that use land space are taxable

Is stamp duty different in Scotland?

Yes, stamp duty is different in Scotland. The Scottish government have a system called Land and Buildings Transaction Tax (LBTT). These are the LBTT bands in Scotland:

• 0% on property valued up to £145,000
• 2% on property valued between £145,001 - £250,000
• 5% on property valued between £250,001 - £325,000
• 10% on property valued between £325,000 - £750,000
• 12% on property over £750,000

There is a LBTT relief for first time buyers in Scotland. First time buyers in Scotland do not pay any tax for properties with a purchase price of £175,000, and pay the standard rates above this. There are higher rates of LBTT if you own two or more properties, up to 16% for the highest tax band.

Is stamp duty different in Wales?

Yes, stamp duty is different in Wales. The devolved Welsh government replaced SDLT with a Land Transaction Tax in 2018. The basic principle is the same, but the tax bands are different. 

• 0% on property valued up to £225,000
• 6% on property valued between £225,001 - £400,000
• 7.5% on property valued between £400,001 - £750,000
• 10% on property valued between £750,000 - £1,500,000
• 12% on property over £1,500,000

There is no relief, discount or lower rate for first time buyers in Wales. There are higher rates of LTT if you own two or more properties.

Do limited companies pay stamp duty?

Yes, when limited companies purchase land or property in England and Northern Ireland they have to pay stamp duty, and there is a 3% surcharge added at every tax band. There are no relief, lower rates or discounts for limited companies.

Is SDLT tax deductible for companies?

It is possible for stamp duty to be tax deductible in certain circumstances for companies. If premises are bought for business use, this is considered a compulsory expenditure, so SDLT can be claimed back. Mixed use properties (flats above shops, for example), have different rates of stamp duty, so the SDLT tax can be deducted when the property is sold.

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