What is Stamp Duty?

Stamp duty is short for stamp duty land tax (SDLT). It’s the tax you pay when you buy a property over a certain value in England and Northern Ireland.

How much stamp duty you will pay is based on the price of the property but can be influenced by factors such as whether you are a first-time buyer, already own a home, and the location within the UK where you are purchasing.

Different stamp duty rates apply depending on the value of the property you are buying which start at a rate of 0% up to a maximum of 12%.

As part of the legal process of buying a property, payment of stamp duty is handled by your solicitor.

HMRC collects stamp duty land tax from your solicitor on behalf of the government after a property transaction has completed.

It is important to understand what stamp duty is, how to make the payment, and the amount you will be required to pay so you can factor the cost into your house buying budget.

What kind of property is subject to Stamp Duty Land Tax?

You must pay SDLT when you are transferred property or land in exchange for payment, buy a freehold property, purchase an existing or new leasehold, or use a shared ownership scheme.

How much does Stamp Duty cost?

There are different rates of stamp duty depending on how much the property costs. If your purchase price is under the lowest threshold, then you don’t pay any stamp duty at all.

It’s important to note that the SDLT is based on the price of the property, not the amount you take out as a mortgage and it doesn’t effect how much council tax you need to pay.

For residential properties the current stamp duty rates are:

• Under £250,000: 0% stamp duty.
• £250,001-£925,000: 5% stamp duty.
• £925,001 and £1.5 million: 10% stamp duty.
• Over £1.5 million: 12% stamp duty.

The stamp duty rate doesn’t apply to the total sum but the portion of the price that’s in each particular stamp duty rate band.  

What? Well, yes, it’s much easier to understand in an example which we give below.

Stamp Duty Land Tax Calculator

SDLT calculation example showing how the stamp duty is worked out for a residential house bought in November 2022 for £300,000.

• First £250,000, 0% to pay = £0.
• Final £50,000, 5% to pay = £2,500.
• Total stamp duty bill = £2,500.
• Total purchase costs = £300,000 + £2,500 = £302,500.

It’s really important to work out your stamp duty costs as you embark on any property purchase.

Your budget will have to stretch to cover this tax straightaway. HMRC has a useful Stamp Duty Land Tax Calculator that helps speed up the maths.

How does first time buyer Stamp Duty relief work?

First-time buyers are not required to pay stamp duty on properties valued up to £425,000. For the portion between £425,001 and £625,000, a 5% stamp duty rate applies.

Essentially, this means that first-time buyers purchasing a property worth up to £625,000 will be exempt from stamp duty on the initial £425,000 and will only pay 5% on the remaining amount.

If your first home costs over £625,000, you can’t claim the first time buyers stamp duty tax relief and the usual rates apply. SDLT relief also doesn’t apply if your first property purchase is a buy-to-let.

You should be eligible for the first time buyer stamp duty relief if:

• You are a first-time buyer.
• You are purchasing a home for your own residence.
• The value of your property is below £425,000 (no stamp duty will be payable).
• Your property falls under £625,000 (you will only pay stamp duty on the amount exceeding £425,000).

Scotland and Wales have slightly different stamp duty schemes in place.

To determine if you qualify for first-time buyer stamp duty relief you don’t need to take any action with your conveyancing solicitor ensuring that you meet the necessary criteria.

Are there any other Stamp Duty exemptions?

There are a few stamp duty exemptions other than for first time buyers, including:

• Gifting of deeds

If you transfer the deeds of your property to someone else as a present, SDLT doesn’t apply.

• Divorce

During a divorce or separation, if you transfer part of a home to an ex-spouse, ex-civil partner or partner, you’re exempt from SDLT.

You can find HMRC’s full list of SDLT exemptions here. Even though you don’t need to pay Stamp Duty, you might still need to send a SDLT return to HMRC.

This is also where you can find this important list. You don’t want to miss out on any crucial paperwork. Especially when there’s a possible fine attached to late or missed filing.

When do I need to pay my SDLT bill to HMRC?

You need to get your stamp duty land tax return and the bill to HMRC within 14 days of buying your property.

HMRC will issue financial penalties if you’re late. Your solicitor usually prepares your SDLT return and pays this for you as part of their service. The cost of the Stamp Duty will be part of their bill.

Stamp Duty extra charges

There are particular circumstances in which property buyers will have to pay extra on their stamp duty.

• Second homes: If your property purchase means that you own more than one home, you pay an additional 3% SDLT. This includes situations where the sale of your home isn’t complete before your buy your new property.
• You’re not resident in the UK: There’s an extra 2% SDLT charge to pay if you’re not in the UK for six months of the twelve months prior to your property purchase.

You can be subject to more than one surcharge at a time. It’s important to check through those details before you embark on the actual purchase.

Investment properties and Stamp Duty

If you’re purchasing property with the intention of making money through rental income, there’s an extra 3% of Stamp Duty to pay.

This takes the stamp duty rate to:

• Properties costing up to £250,000: 3%.
• Properties between £250,001 and £925,000: 8%.
• Properties between £925,001 and £1.5m: 13%.
• Properties costing over £1.5m: 15%.

Business properties and commercial Stamp Duty

HMRC has an entire section of stamp duty rules for ‘Rates for non-residential and mixed land and property.’

Basically you usually pay SDLT on commercial properties worth over £150,000, but you still have to send a SDLT return for anything under that value.

Commercial property stamp duty rates:

Commercial property value below £150,000: 0%.

Commercial property value £150,001 to £250,000: 2%.

Commercial property value above £250,000: 5%.

Again if you’re thinking of a business property purchase don’t forget to include the SDLT in your total calculations.

Stamp Duty Tax Refunds

A stamp duty rebate is a refund given by the government to those who have overpaid on their stamp duty land tax.

In certain situations you may end up overpaying SDLT which you can reclaim as a stamp duty rebate from HMRC.

This overpayment isn’t automatically repaid by HMRC and you need to follow a stamp duty refund claim process.

There could be a variety of reasons why a person might overpay their stamp duty and you need to comprehend which of the SDLT regulations apply to your situation to make sure you don’t miss out on a stamp duty refund or mistakenly file a claim for one.

Our stamp duty refund claim guide gives you more information on why you could be owed a SDLT repayment and how to make a claim directly with HMRC.

SDLT Top Tip

Make sure you check the SDLT rates that apply when you’re purchasing property. During the pandemic, various schemes were introduced in the property sector to support its survival. But that doesn’t mean they still apply now.

Don’t just rely on advice from people you know, even if their purchase was relatively recent. You need to go straight to HMRC’s website and get the most up-to-date SDLT information for your property purchase.

What about property in Scotland and Wales?

As devolved governments, Scotland and Wales set their own rates of tax. And stamp duty is called by different names. If you’re buying property in either country, you need to check their rules and rates here:

• Scotland: Land and Buildings Transaction Tax
• Wales: Land Transaction Tax