With different rules for different circumstances, Stamp Duty can be a confusing subject. Don’t worry, though, we here at Jackson Barrett and Gass are happy to explain everything you need to know about Stamp Duty.
What is Stamp Duty?
Stamp Duty is a type of Land Tax that applies to both freehold and leasehold properties. It applies whether you are buying outright or with a mortgage.
If you are buying a residential property in England or Ireland that costs more than £125,000, you will have to pay Stamp Duty Land Tax on your purchase. However, there are many variables that impact the cost of Stamp Duty, which we will explain further down this blog post, including:
- The price of the property you are buying
- If you are buying an additional property such as a second home
- Whether or not you are a first-time buyer
How Much Stamp Duty Will I Have to Pay?
Stamp Duty costs are calculated using several rate “bands”. You do not pay Stamp Duty on the first £125,000 of a property (unless you are buying a second home). Thereafter, Stamp Duty Land Tax is calculated on the part of the property price falling within each rate band. You can use a Stamp Duty Land Tax calculator to find out how much Stamp Duty you will pay on a property or simply consult this handy chart.
|Property Price||£0 - £125,000|
|Stamp Duty Rate Band||0%|
|Property Price||£125,001 - £250,000|
|Stamp Duty Rate Band||2%|
|Property Price||£250,001 - £925,000|
|Stamp Duty Rate Band||5%|
|Property Price||£925,001 - £1.5 million|
|Stamp Duty Rate Band||10%|
|Property Price||Over £1.5 million|
|Stamp Duty Rate Band||12%|
|Property Price||Stamp Duty Rate Band|
|£0 - £125,000||0%|
|£125,001 - £250,000||2%|
|£250,001 - £925,000||5%|
|£925,001 - £1.5 million||10%|
|Over £1.5 million||12%|
Stamp Duty and Additional Properties
If you are buying an additional residential property, such as a second home or a buy-to-let property, you will have to pay an extra 3% Stamp Duty Land Tax on top of the current rates for each band. Additionally, you will start paying Stamp Duty at a much lower property price than you would on your first home (£40,000 or more). This does not apply to caravans, mobile homes, or houseboats.
Do I Have to Pay Increased Stamp Duty if I Purchase a Second Property but I’m Selling My First Property?
If you are purchasing an additional residential property, with the intent to sell your main residential property, you will still have to pay the higher Stamp Duty rates on your second property as you will technically own two properties. However, if you sell (or even give away) your main property within 3 years of buying a new home, you can apply for a Stamp Duty Land Tax refund for the higher rate part of the Stamp Duty Land Tax bill on the new home.
Stamp Duty and First-Time Buyers
First-time buyers are eligible for Stamp Duty relief, meaning you will not be charged Stamp Duty on the first £300,000 of your property. If the property you are buying costs up to £500,000 you will pay no stamp duty on the first £300,000 but will have to pay Stamp Duty on the remaining amount up to £200,000.
If the property you are buying is worth more than £500,000 you will not be eligible for first-time buyer’s relief and will have to pay the standard rates of Stamp Duty. In addition, first-time buyers under Shared Ownership schemes can now claim first-time buyer’s relief on homes worth up to £500,000.
IMPORTANT: If you are married, or are jointly buying a property with another person, you must both be first-time buyers in order to be eligible for Stamp Duty relief.
How and When Do I Pay Stamp Duty?
Your solicitor will handle the Stamp Duty return and any payment, although you can do it yourself. You must submit a Stamp Duty return and pay what you owe within 30 days of completing the purchase of your home or you may incur penalties and have to pay interest.
IMPORTANT: Even if your property costs less £125,000, and you don’t need to pay any Stamp Duty, you must still submit a return.
Are you purchasing a residential property? Let us take the stress out of the legal side of things with our expert residential Conveyancing services. Get in touch and find out how we can help you buy your property.