As Benjamin Franklin famously said, “Nothing can be said to be certain except death and taxes”. One such tax, and a bane to many, is Stamp Duty Land Tax (SDLT) which, unless you’re a first-time buyer purchasing a home for less than £300,000, is paid on freehold, leasehold, residential and commercial properties, regardless of whether you’re buying in cash or with a mortgage.
There are three categories of stamp duty, according to a person’s buying position:
- First-time buyers
- Buyers replacing their primary residence
- Those purchasing properties in addition to their primary residence
The following guide explains how stamp duty is calculated for these three categories.
Stamp duty is applicable on any primary residence purchased above £125,000 and over £40,000 for additional homes. Following changes to stamp duty regulations at the end of 2017, the government established reliefs for first-time buyers purchasing property under £500,000.
Who pays stamp duty in England and who is exempt?
How is stamp duty calculated?
The amount of stamp duty ranges from 0% to 15% of the property purchase price. As with income tax, the rate is calculated proportionately in a ‘tiered’ structure, so you’ll pay the rate for the proportion of the property that falls within that band. More on that in a moment!
1. First-time buyers
How much is stamp duty for first-time buyers?
From November 2017, stamp duty has been abolished for first-time buyers purchasing properties up to £300,000, and is charged at a rate of 5% for the amount between £300,000 and £500,000. This means that first-time buyers in this bracket can now save up to £5,000 on their stamp duty levy. Be mindful though that stamp duty is calculated according to primary residence rates for property purchases over £500,000.
Tax bands for first-time buyers are now as follows:
Benefitting from this reduced rate can be tricky in some parts of London, so here’s our selection of properties for sale London under £500,000.
Do I get the first-time buyer stamp duty relief if I have previously owned a share or interest in a property?
Unfortunately, under the legislation, a person who has owned any share or interest in a property, anywhere in the world, is excluded from the relief. This includes shared ownership schemes, shares in parents’ houses and if you have bought with someone else previously. Those who’ve inherited a property or were given one as a gift are also ineligible, as this counts as owning a property previously.
2. Buyers replacing their primary residence
What are the stamp duty bands for those replacing a primary residence?
For those who are replacing their primary residence, stamp duty is calculated as follows:
3. Second-home buyers and buy-to-let landlords
How much is stamp duty for buy-to-let property owners and additional home-owners?
From April 2016, those buying an additional home or a buy-to-let property must pay a further 3% stamp duty on the full purchase price for properties over £40,000. Additional properties bought for under £40,000 are exempt from stamp duty – think garages!
Second home and buy-to-let stamp duty rates:
How do I calculate how much stamp duty I owe?
Calculating stamp duty is a little complex, so here’s an example to better illustrate how it works:
For a property purchased at £700,000, no stamp duty would be paid on the first £125,000, 2% on £125,001 to £250,000 and 5% on £250,001 to £700,000, totalling £25,000.
To keep it simple, you can also use one of the many online calculators to determine the stamp duty you will pay. We always rely on the HMRC calculator.
Alternatively, for more information about stamp duty or the buying process, our expert sales teams would be happy to chat to you. Find your local Marsh & Parsons office here.
Looking to buy a property in London? Take a look at the variety of properties we have for sale.
Frequently asked questions (FAQs) about stamp duty
How much stamp duty do I pay as a landlord if I’m replacing my main residence?
Landlords replacing their primary residence aren’t liable to pay the additional 3% stamp duty on the purchase, despite owning additional properties elsewhere. Proof that the residence is the permanent address will be required, which can include an electoral roll document or registration note from your local doctor.
Do I pay the additional stamp duty charge on a UK property if I own one abroad?
Yes, for those who own or part-own a property abroad but are purchasing an additional one in the UK, the second-home stamp duty charge will apply.
What if I am buying a home for my child?
If a property is purchased as a joint ownership (i.e. by both parent and child), then the extra 3% tax will apply if the parent currently owns their own home. However, if the money is being gifted and the property is owned outright by the child as their primary residence, the amount of stamp duty paid reverts to the standard rate and is paid by the purchaser.
Do I pay stamp duty on a property that has been left to me in a will?
Properties that have been inherited are exempt from stamp duty, however, if you have been left a property and then buy your first home (i.e. your purchase is not replacing your main residence), you may be liable for the additional residence stamp duty tax. Your solicitor will be able to advise you in this situation.
Do I pay the additional stamp duty charge if I am buying with a partner who doesn’t own a property?
Yes, if either party buying a property currently owns an additional home and plans to keep it, the 3% surcharge applies. However, if the property is bought solely in the name of the first-time buyer, then the single-home rate will be paid. In this case, some mortgage lenders will allow two names on the mortgage to increase affordability, and just one on the property deeds.
When is stamp duty paid?
Stamp duty must be paid to the HMRC within 30 days of completion. Failure to do so can result in a fine and payment of interest. Visit the HMRC website for more details on how to pay your stamp duty.
Can my solicitor pay the stamp duty on my behalf?
Most solicitors or legal advisors will take care of stamp duty payment as part of their service to ensure it’s paid before the deadline passes. Be sure to confirm this with your solicitor to avoid late payment.
We hope the above gives you a general overview of how stamp duty works for property transactions in England. It’s certainly not exhaustive, and there are other cases where stamp duty exemptions apply, so visit the HMRC website if you’d like to know more.
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