Stamp Duty guide

Stamp duty is a government tax on some individuals who buy a property in England or Northern Ireland.

Understanding residential SDLT rates is crucial for anyone involved in the purchase of a property because it can significantly impact your overall costs.

SDLT applies to residential properties with a price tag over £250,000 with a number of different rates applicable depending on the property value, type and your buying status.

Calculating your stamp duty liability as part of your overall property buying costs is always recommended to avoid an unexpected bill when you buy your next property.

Our stamp duty guide will review:

• Single property SDLT rates.
• First time buyer stamp duty relief.
• Second home purchases stamp duty.
• New leasehold sales and transfers.
• Non UK residents stamp duty.
• Exemptions for replacing your main residence and refunds available if selling a previous home within 36 months.

If your property is in Scotland you’ll be liable for land and buildings transaction tax (LBTT), and in Wales you’ll pay land transaction tax (LTT) instead of SDLT.

Who has to pay Stamp Duty?

Stamp duty land tax is a mandatory fee if you’re an individual purchasing property or land above a specific value in England and Northern Ireland.

SDLT is applicable when you:

• Buy a freehold property.
• Purchase a new or pre existing leasehold property.
• Invest in property under a shared ownership scheme.
• Receive land or property as a transaction like taking on a mortgage or purchasing a stake in a house.

What are the Stamp Duty Land Tax Rates?

When buying a home in the UK it’s crucial to understand the different rates of stamp duty land tax (SDLT) that may apply.

SDLT rates vary mainly based on property price and the government can change the percentage of tax charged and thresholds so it’s best to check them at the time of your next property purchase.

Single property SDLT Rates

• No SDLT: Properties costing up to £250,000.
• 5% SDLT: Properties priced between £250,001 and £925,000.
• 10% SDLT: Properties priced between £925,001 and £1.5 million.
• 12% SDLT: Properties priced over £1.5 million.

First time buyer Stamp Duty Rates

The government allow a first time buyer relief on properties bought up to the value of £625,000.

• No SDLT: Properties costing up to £425,000 for first time buyers.
• 5% SDLT: On the difference from £425,001 up to £625,000 for first time buyers.

First time buyer stamp duty relief is not available on properties bought for more than £625,000. You will need to pay the standard SDLT rates on any property after the £625,000 threshold.

Stamp Duty Higher Rates

When purchasing a residential property (or part of one) that is priced at £40,000 or more you’re normally required to pay the increased stamp duty land tax rates if all the following conditions are met: –

• This isn’t your only residential property valued at £40,000 or more that you possess or have a share in, anywhere globally.
• You haven’t disposed of or transferred your former main residence.
• There isn’t a lease on the property with over 21 years remaining.

The necessity to pay the escalated rates may still apply even if you plan to reside in the property you’re purchasing, irrespective of whether you already possess a residential property or not.

This is because the regulations are applicable not only to you (the purchaser) but also to anyone you’re wedded to or purchasing with.

If you’re wedded or in a civil partnership:

The laws are enacted as though you’re jointly purchasing the property, even if you’re not. If either one of you individually is required to pay the higher rates, the transaction as a whole must be subjected to these rates (unless you’re permanently separated).

Purchasing with another person:

The rules pertain to each individual (and their spouse) involved in the property purchase.

If any one of you individually is required to pay the higher rates the transaction as a whole must be subjected to these rates.

If you’re purchasing as a trustee:

The regulations may be relevant to the trust’s beneficiary, not you, based on the trust’s nature.

Stamp duty land tax higher rates:

Property or lease premium or transfer value	SDLT rate
Up to a value of £250,000	3%
The next £675,00 from £250,001 up to £925,000	8%
The next £575,000 from £925,001 up to £1.5 million	13%
The remaining amount (the portion above £1.5 million)	15%

Stamp Duty Exemptions

Some individuals, properties, and transactions may qualify for an exemption from the stamp duty higher rates.

Individuals:

If you occupy your newly acquired property as your primary residence and have disposed of or gifted any previous primary residence prior to or on the same day as purchasing your new home.

Properties:

The exclusion extends to a property (or a portion of it) if any of the following criteria are met:

• The property’s value falls below £40,000.
• The property encompasses both residential and non residential areas.
• The property is relocatable like a mobile home.

Leased property:

For leased properties an exemption is typically given if either: your lease term is 7 years or shorter (from the date it was issued) the lease is held by another party and more than 21 years remain.

Stamp Duty on second homes

Higher SDLT rates are given to second homes currently worth more than £40,000 so be aware if you’re considering buying another property.

Stamp duty rates for second homes are usually 3% above the standard SDLT rates and can seriously impact your tax bill.

The most common situations where stamp duty on second homes applies includes a property being bought as a rental investment or as a holiday home.

Working out your second homes stamp duty liability is especially important for landlords who need to be conscious of all their purchasing costs before starting the buying process.

Stamp Duty Calculator

Calculating your stamp duty liability is very important so you know what you will pay when your property transaction completes.

If a property qualifies for stamp duty what you pay is calculated as a percentage of the price paid for the property.

Don’t let the thought of calculating your SDLT liability scare you. HMRC has got your back with their online calculator.

HMRC’s SDLT online calculator is ideal if you want to estimate your stamp duty bill. It’s easy to use and provides accurate results.

Simply enter the purchase price of the property, select whether it’s residential or non residential, and provide any additional information about your circumstances.

It’s a good idea to verify the accuracy of your SDLT calculation with a knowledgeable advisor to guarantee you are adhering to all applicable regulations.

Replacing your main residence Stamp Duty exemption

In some cases you might not have to pay the higher rate if you’re replacing your main residence. If you sell your primary home and purchase a new one within 36 months it’s possible that the higher rate of SDLT can be avoided.

SDLT refunds 36 months rule

If you paid the higher SDLT rate but later sold your former main residence within three years of buying the new property you might be eligible for a stamp duty refund.

New leasehold sales and transfers SDLT charges

The purchase or transfer of new leasehold properties (bought for more than £40,000) also attracts SDLT charges based on whether it’s an already existing lease (also known as an assigned lease) or a new one.

Depending on the type of leasehold various factors can effect your stamp duty charge like premium value and net present value (NPV) of rent payable during the lease term.

You can use the HMRC SDLT lease transactions calculator to estimate the stamp duty payable on your leasehold property.

Stamp Duty for non UK residents

Non UK residents purchasing a residential property in England or Northern Ireland should be aware of potential extra charges that may affect their Stamp duty land tax (SDLT) bill. These extra charges can seriously affect your SDLT bill.

If you’ve spent less than 183 days in the UK during the 12 months before your transaction date you will typically be considered a non UK resident for stamp duty purposes. This usually applies to both non resident individuals and companies buying residential properties.

Good news. Some non residents may be exempt from SDLT surcharges. For example if you’re buying a mixed use property or qualify for multiple dwellings relief you might not have to pay the extra charge.

For more details regarding SDLT charges and regulations for foreign buyers of residential properties in England/Northern Ireland you can consult the gov.uk instructions concerning non residential SDLT or a tax professional.

Stamp duty for commercial properties

Commercial properties qualify for different stamp duty rates which are scaled from zero up to five per cent.

A commercial property worth up to £150,000 is generally exempt from stamp duty with a rate of 2% applicable on a value between £150,001 up to £250,000.

The rate of 5% is then used for any remaining value over the £250,000 threshold.

Commercial property stamp duty rates:

Property value up to £150,000	0%
Property value from £150,001 to £250,000	2%
Property value above £250,000	5%

How do I pay SDLT?

HMRC expect you to submit an SDLT return to them and remit the tax within 14 days from the property purchase completion date.

If you’re represented by a solicitor, agent, or conveyancer they’ll normally handle the submission of your SDLT return and payment of stamp duty to HMRC on the completion date.

You have the option to file the SDLT return and settle the tax on your own directly with HMRC instead of using a third party.

Failure to submit your forms on time could result in a penalty. There’s a 10% fine on the tax due for documents submitted up to a year late capped at £300.

A 20% fine applies if the submission is between 12 and 24 months late. If you exceed a 24 month delay in submission a 30% fine on the tax amount is applicable.

Any unpaid stamp duty charges will also accrue interest until the tax is fully paid.

Stamp Duty refunds

A stamp duty refund could be repaid by HMRC for a variety reasons and circumstances including:

• Houses with an annexe.
• Shared ownership for first time buyers.
• Uninhabitable buildings.
• Miscalculated properties.
• Multiple dwellings relief.

The UK government in May 2022 alerted new property owners about the potential risk of scam tax repayment agents who cold call urging them to file uncertain stamp duty refund claims which may result in significant tax liabilities.

The government suggests that you first consult with the conveyancer or solicitor that initially managed your property purchase and you can reach out to the HMRC call centre helpline (0300 2003 510) for guidance.