At Real Estate Agents London, our experienced estate agents are always up to date on the latest rules and regulations and offer property buyers all the support and advice they need to make the best choice when purchasing a property. Whether you are a first-time home buyer, looking to buy a new or second home or an investor, we have all the information you need to assist you in securing the ideal property.
If you’re interested in purchasing a property, you may have also heard about stamp duty. It also known as SDLT, is a tax that must be paid by property buyers when purchasing a first home, a new home, or a second property.
What Is Stamp Duty?
It is a tax on residential property and land purchases in England and Northern Ireland, applied to purchases over a certain price threshold.
In Scotland, it’s known as land and buildings transaction tax (LBTT) and in Wales, land transaction tax (LTT). It applies to freehold and leasehold properties, purchased directly or with a mortgage.
Until 30 September 2024, It was not applied for properties under £250,000. After 1 October 2024, properties under £125,000 will be exempt.
Rates vary for:
- First-time buyers
- Additional properties
- Non-UK residents
First-time buyers pay no stamp duty on properties up to £300,000, with a discount for properties up to £500,000. Buyers of additional properties pay an extra 3% for properties over £40,000.
Who Needs to Pay Stamp Duty?
It is owed by the property buyer. The seller does not have to pay any stamp duty unless they buy a property themselves.
Stamp Duty Residential Property Rates
The standard stamp duty rates valid as of 1 October 2021 are:
- 0% SDLT for the properties under £125,000
- 2% SDLT for the price portion between £125,001 and £250,000
- 5% SDLT for the price portion between £250,001 and £925,000
- 10% SDLT for the price portion between £925,001 and £1,500,000
- 12% SDLT for the price portion exceeding £1,500,001
Stamp duty rates are different depending on whether or not you are a first-time buyer and the type of property you are purchasing.
Keep reading to discover the rates for different buyers and properties. Alternatively, use the government’s stamp duty calculator to determine your tax amount.
How Much Stamp Duty Do First-Time Home Buyers Pay?
First-time buyers are individuals acquiring their first property to be used as a residence. If you have owned any other properties in the past, in the UK or abroad, you will not be considered a first-time buyer for the purpose of stamp duty.
The initial stamp duty rate for first-time buyers, valid until July 2020, applied to properties valued up to £300,000.
From July 2023 until July 2024, first-time buyers benefitted from a government-issued stamp duty holiday, applicable for properties in England and Northern Ireland valued up to £500,000.
As of 1 July 2024, first-time buyers pay no stamp duty for properties up to £300,000. For properties valued between £300,001 and £500,000, first-time buyers pay 5% SDLT on the portion of the price exceeding £300,000.
For example, if you are buying a first home worth £300,000, no stamp duty is due. However, if the home costs £350,000, you will pay a 5% stamp duty on the portion from £300,001 to £350,000.
For properties exceeding £500,000, first-time buyers are subject to the standard stamp duty rates and do not receive any relief.
How Much Stamp Duty Do You Pay for a Second Home?
When it comes to additional properties, stamp duty rates are calculated by threshold. Therefore, if the additional property you are purchasing costs less than £40,000, the SDLT is 0.
For properties exceeding £40,000, you will pay:
- 3% SDLT for the price portion between £40,001 and £125,000
- 5% SDLT for the price portion between £125,001 and £250,000
- 8% SDLT for the price portion between £250,001 and £925,000
- 13% SDLT for the price portion between £925,001 and £1,500,000
- 15% SDLT for the price portion exceeding £1,500,001
How Much Stamp Duty Do You Pay for a New Build?
The standard stamp duty rates apply to new builds in the same way they do for other types of properties. You can calculate how much stamp duty you need to pay depending on the final price of the new build you choose and the type of buyer you are.
The final price will include any additional or optional features such as the kitchen and bathroom fittings or built-in wardrobes.
However, you may be able to save some money from the total property price as stamp duty does not apply to any removable fixtures. These may include furniture, carpets, curtains, etc. You can subtract the value of these removable fixtures when calculating the final price you owe stamp duty on.
How Much Stamp Duty Do You Pay for a Shared Ownership?
For shared ownership properties, the SDLT rates remain the same. The difference is that you have several options for paying the tax. Thus, you can either make a one-off payment or pay in stages.
If you make a one-off payment, it will be based on the market value of the property. You will not have to make any additional payments thereafter.
If you want to pay SDLT in stages, you will pay the tax due for the first sale amount and delay any further tax payments until you acquire 80% of the total property.
The shared ownership schemes this applies to must be run by:
- A local housing authority
- A housing association or action trust
- The Northern Ireland Housing Executive
- The Commission for the New Towns
- A development corporation
How Much Stamp Duty Do You Pay If You Are Not a UK Resident?
If you haven’t lived in the UK for at least 6 months during the last 12 months before the purchase, you may be subject to a 2% SDLT surcharge. This is because you will not be considered a UK resident for the purposes of stamp duty.
However, certain categories of buyers can claim relief. To learn more about this type of relief, click here.
What Is the Deadline for Paying Stamp Duty?
The deadline for paying stamp duty is 14 days from the effective date of the transaction. To pay it, you will have to file a SDLT return.
Penalties and interest are applicable if you fail to submit the return and make the payment by this deadline.
How Do You Pay Stamp Duty?
The solicitor handling your property transaction can handle the stamp duty payment as well. Most property buyers prefer this as it is easier for them.
However, if you prefer, you can also submit the return and make the payment yourself through HMRC.
Make sure you do this even if there is no stamp duty due for the property you are purchasing.
Stamp Duty Exemptions
It also comes with certain exceptions. These include:
- Properties transferred based on a court order in a separation, divorce, or dissolution proceeding
- Properties acquired based on a will
- Gifted properties if there is no outstanding mortgage on them
Check the full list of reliefs and exemptions here.
When Can You Reclaim Stamp Duty?
In certain cases, you may be able to reclaim all or part of the stamp duty you paid when purchasing a property. To be able to reclaim the tax, you must be the main buyer of the property or an agent acting for them.
One example is if you paid the higher rate of stamp duty applicable to additional properties and sold your main home in the meantime. The sale of your main residence must take place within 3 years of buying the new property.
This 3-year period may be exceeded only in exceptional circumstances that were outside your control, such as:
- The sale was prevented by the impacts of the COVID-19 pandemic
- The sale was prevented due to action taken by a public authority
To benefit from the refund, you must contact HMRC after you have managed to sell the previous home and explain the reasons that prevented you from doing so within the 3-year deadline.
Conclusion
It was first introduced as a means for the government to raise money to fund the war against France in 1694. Even though that war has long ended, stamp duty is still applicable today.
And since it is a welcome way to increase government revenue, it doesn’t look like it will be eliminated soon.
Therefore, in order to not exceed their budgets, property buyers should be well aware of applicable stamp duty rates and take into account how they will affect their transactions and finances.
At Real Estate Agents London, we pride ourselves on our vast experience in closing profitable real estate deals for both buyers and sellers and are always available to support our clients. We provide extensive advice on applicable rules, regulations, and taxes, and guide buyers from the start of their property search to the successful closing of the transaction. To learn more about how we can assist you, contact us at 0207 055 0441.
Frequently Asked Questions
SDLT is a tax that must be paid when purchasing residential property in England or Northern Ireland. You must pay stamp duty if the property’s price exceeds certain thresholds. First-time home buyers can benefit from tax exemptions, and the amount due is based on the property’s value. The payment must be made within 14 days of the property transaction..
First-time home buyers are exempt from paying stamp duty on properties up to £300,000. If the property costs between £300,001 and £500,000, first-time buyers pay 5% SDLT on the portion of the price that exceeds £300,000. However, properties over £500,000 are subject to standard stamp duty rates.
For shared ownership properties, It is calculated based on the market value of the property, and the payment can be made in stages. If you make a one-off payment, it will cover the full SDLT amount based on the property’s market value. Alternatively, you can pay in stages as you acquire more shares in the property.
