What is stamp duty – and do I have to pay it?

What is Stamp Duty Land Tax?

Stamp Duty Land Tax (SDLT) is a tax you pay as a lump sum when you buy a house and was introduced in December 2003. Usually, you don't have to pay this if you are a first time buyer and prior to 8th July 2020, if you weren't buying for the first time you would have had to pay this tax on your house purchase on residential properties over £125,000 or non-residential properties over £150,000. 

First time buyers

On 8th July 2020 the Chancellor, Rishi Sunak, announced a stamp duty holiday until 31st March 2021 which will mean;

  • All main residential house purchases up to the value of £500,000 will not have stamp duty applied to them in order to kick start the property ladder after the coronavirus pandemic. 
  • The changes to stamp duty will only apply to buyers in England and Northern Ireland. 
  • Properties above £500,000 will only be taxed on the value above the £500,000 threshold. 
  • This discount also applies to second home and buy-to-let purchases although these purchases will need to pay an additional 3% surcharge rate.

How much Stamp Duty Land Tax do I have to pay?

The Stamp Duty Land Tax rate and the amount you pay varies firstly according to whether the land or property is residential or non-residential and mixed use. 

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 for freehold sales:

  • Up to £500,000: Zero
  • Over £500,000 and below £925,000: 5%
View the Government's Stamp Duty Land Tax calculator to work out what your SDLT could be if you were to complete on a property over £500,000 between 8th July 2020 and 31st March 2021. 

When do I pay stamp duty? 

When you buy a new home you submit a Stamp Duty Land Tax return to HMRC 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 but it is best to double check with them whether they are dealing with it or not. 

If the purchase price is below £125,000, or you are a first time buyer purchasing a property up to £500,000, 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. 

Remember to factor in any potential SDLT alongside your savings for your deposit and other moving costs. Check out our range of savings accounts to see if there is something suitable for your next home savings. 


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