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A Guide to Stamp Duty for Homebuyers

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What is Stamp Duty?

Stamp Duty Land Tax (SDLT) – commonly shortened to stamp duty – is a one-off tax paid on properties purchased in England and Northern Ireland. The tax no longer applies in Scotland or Wales, having been replaced by the Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT) respectively.

How Much is Stamp Duty?

Unless you are a first-time buyer, stamp duty applies to all property purchases over £250,000 in value. The percentage you are taxed rises with the value of the property, as below:

Property Value / Lease Premium SDLT Tax Rate
Up to £250,000 zero
The portion from £250,001 – £925,000 5%
The portion from £925,001 – £1,500,000 10%
The remaining amount, £1,500,001 and upwards 12%

You need to submit an SDLT return within 30 days of completing the purchase of the property or HMRC will charge you a fine plus interest.

For a reliable assessment of the stamp duty you can expect to pay, take a look at our Stamp Duty calculator.

Second Properties

If you’re buying a second property, there is a higher rate to pay. The stamp duty on second properties is 3% on top of the normal rate if buying a new house means you own more than one.

However, you can claim this back if you then sell what was previously your main residence within three years of buying the second property, and claim within three months of this sale.

Stamp Duty for First-Time Buyers

In September 2022, changes were announced to the stamp duty payable. Previously, everyone buying a property in England and Northern Ireland paid stamp duty on purchases over £125,000.

First-time buyers no longer need to pay stamp duty on purchases up to £425,000 in value, and with a reduced liability on properties between £425,001 up to £625,000.. On properties over £625,000, stamp duty is paid as normal.

Are You in it Together?

If you are in a marriage or partnership and buying jointly, then you both need to be first-time buyers in order to qualify for this relief. You can try to circumvent this by only naming the first-time buyer on the deed. However, it’s worth being aware that should you split up for any reason, that person would legally have sole claim on the house.

Don’t Ignore the Return

To ensure you get relief on this tax, you still have to complete the SDLT return, even if no tax is due.

Stamp Duty Land Tax Exemptions

There are a few instances where the transaction you make on a property is such that you do not need to tell HMRC about it or file a SDLT return. They are:

  • If no money or other payment changes hands (i.e. it was a gift)
  • If the property was left to you in a will
  • If the property is transferred to you due to a divorce, or dissolution of a civil partnership
  • If you buy a freehold property for less than £40,000
  • If you buy a new or assigned lease of seven years or more, as long as the premium is less than £40,000 and the annual rent is less than £1000
  • If you use alternative financial arrangements for the property, e.g. to comply with religious laws

Note: if you simply swap properties with someone else, then it is viewed that something of value was given as payment, even though no actual money has changed hands. SDLT will be applicable on the market value of the property.

When in Doubt…

Double-check the HM Revenue & Customs website for information on all taxation matters. They present all the facts and issues in a simple, user-friendly way that leaves nothing to misunderstanding, and you can be sure that what you are reading is accurate and up-to-date.

Alternatively, mortgage brokers and independent financial advisers will be able to tell you exactly where you stand when it comes to stamp duty.

Need More Advice on Your Tax Responsibilities?

Get in touch with your local Mortgage Centres office today and speak to one of our friendly and professional advisers. They will be more than happy to take a look at what you need and go over all the details. House purchases don’t have to be complicated. Let us do the hard work for you.

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