What is stamp duty – and do I have to pay it?
Stamp Duty Land Tax was introduced in December 2003.
It’s a tax you pay as a lump sum when you buy a house
costing more than £125,000.
Everyone has to pay it, whether you’re a first time buyer or moving up the housing ladder
The stamp duty rate and the amount you pay varies according to the price of the property.
But you'll only pay that sliding scale rate for the proportion of the property price that’s inside that band, according to these rules:
- Up to £125,000: Zero
- 2% on the next £125,000 (between £125,001 and £250,000)
- 5% on the next £675,000 (between £250,001 and £925,000)
- 10% on the next £575,000 (between £925,001 and £1.5m)
- 12% on anything above £1.5 million.
It sounds more complex than it is, so here's an example.
If you buy a property for £300,000, such as the one in the illustration below, you pay:
- No stamp duty on the first £125,000;
- 2% for the part between £125,000 and £250,000;
- 5% on the value of the property above £250,000.
So in total this means you'll pay £5,000 (£0 + £2,500 + £2,500).
Homeowners buying a second home will pay more because each band is 3% higher.
This means for the same £300,000 home, stamp duty would be:
- 3% on the first £125,000;
- 5% for the part between £125,000 and £250,000;
- 8% for the part between £250,000 and £925,000.
So the total £14,000 is made up of £3,750 + £6,250 + £4,000.
When do I pay stamp duty?
When you buy a new home you submit a Stamp Duty Land Tax return and pay what you owe within 30 days of completion. If it’s not paid, you’ll be charged a £100 penalty plus interest. Usually your solicitor will deal with the stamp duty return and payment for you.
If the purchase price is below £125,000 you still need to submit a return even though you won’t need to pay any stamp duty, again this will usually be dealt with by your solicitor.
Can I reduce my stamp duty?
There are some circumstances in which stamp duty is either not payable or can be legitimately reduced.
- Transfer some of your home’s value. This only applies if you’re divorcing or separating from your spouse or partner but there’s no stamp duty to pay if you transfer a proportion of your home’s value to them.
- Transfer the deeds of your home to someone else – either as a gift or in your Will – they won’t have to pay stamp duty on the market value of the property. However, if you exchange properties with another person, you’ll each have to pay stamp duty on the property you receive based on its market value. Visit the gov.co.uk website for more on this and other situations where stamp duty may not be payable.
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