In England, Northern Ireland and Wales you’re liable to pay Stamp Duty when you buy a residential property, or a piece of land, that costs more than £125,000 (or more than £40,000 for second homes).
This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.
Usually your solicitor will deal with the Stamp Duty return and any payment due for you, although you can do it yourself. Either way, you’re responsible for making sure it’s all submitted on time. If the price of your new home is under £125,000, you must still submit a return (unless exempt) even though you won’t need to pay any Stamp Duty.
How much is Stamp Duty?
There are several rate bands for Stamp Duty. The tax is calculated on the part of the property purchase price that falls within each of the following bands:
£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%
For example, if you buy a house for £275,000, the Stamp Duty Land Tax (SDLT) you owe is calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £25,000 = £1,250
Total SDLT = £3,750
Stamp Duty on second homes
Buyers of additional residential properties, such as second homes and buy-to-let properties, will have to pay an extra 3% in Stamp Duty on top of current rates for each band. This increased rate applies to properties bought for £40,000 or more but it doesn’t apply to caravans, mobile homes or houseboats.
If you buy a new main residence but there’s a delay in selling your previous main residence, you’ll have to pay the higher Stamp Duty rates as you’ll now own two properties. You can request a refund for the amount above the normal Stamp Duty rates if:
You sell your previous main residence within three years, and
You claim the refund within three months of the sale of your previous main residence, or within 12 months of the filing date of your self-assessment tax return, whichever comes later.
Stamp Duty for first time buyers
A person is generally classified as a first-time-buyer if they’re purchasing their only or main residence and have never owned a freehold or have a leasehold interest in a residential property in the UK or abroad.
In 2017 the chancellor announced a cut in stamp duty for those buying a home for the first time. If you’re a first-time-buyer in England, Wales or Northern Ireland, you will pay no Stamp Duty on properties worth up to £300,000. This means if you are a first-time-buyer, you will save up to £5,000.
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