A guide to understanding stamp duty

Whether you’re a first-time buyer or looking to move to a home that’s better suited to your family’s needs, buying a home is an exciting time. However, there’s no denying that it can also be a stressful time in your life.

In the UK, when you decide to buy a home over a certain price, you will be liable to pay Stamp Duty Land Tax (in England or Northern Ireland), Land and Buildings Transaction Tax (in Scotland) or Land Transaction Tax (in Wales, after 1 April 2018).

It can be frustrating to add another fee to an already costly transaction, so it’s important to know upfront exactly what you’ll be paying and why you need to pay it.

Read on to understand more about Stamp Duty Land Tax in England and Wales.

What is stamp duty?

In the UK, you’re required to pay Stamp Duty tax on a house that you’re buying in England or Northern Ireland if it’s over a certain value.

Stamp Duty has been around since the 17th century. It was predominantly a way to raise money to pay for ongoing wars against France. Since it proved to be a very successful way of raising revenue for the government, the tax has remained in place to this day.

Stamp Duty was so-named because documents were physically stamped as proof that the payments had been made.

The amount of Stamp Duty you need to pay varies according to the following:

  • The value of the property purchased;
  • The number of houses you own; and
  • Whether you are a first-time buyer.

So it can be confusing to work out exactly how much Stamp Duty you’ll pay on your house purchase. It’s also worth bearing in mind that the Stamp Duty thresholds do change, so it’s important to check the latest requirements so that you know exactly how much tax you’ll be required to pay on your next house purchase.

Stamp duty thresholds 2022

The current thresholds for Stamp Duty tax have been in effect since 23rd September 2022 and are as follows for a single property:

  • The first £250,000 – 0%
  • The next £625,000 (The portion of the property price between £250,001-£925,000) –  5%
  • The next £575,000 (The portion of the property price between £925,001-£1.5 million) – 10%
  • The portion of the property price over £1.5million – 12%

These rates are combined as your property purchase price increases.

For example, if you purchase a house for £850,000 in December 2022, then the Stamp Duty is calculated as follows:

0% on the first £250,000 = £0
5% on the final £600,000 = £30,000
Total Stamp Duty Land Tax = £30,000

This equates to a Stamp Duty tax rate of 3.5%, which is £30,000.

Buying a property is one of life’s most expensive transactions, so it’s important to understand cost information specific to your transaction and ensure you budget appropriately.

If you own another residential property, you’ll normally pay an additional 3% on top of the basic Stamp Duty rates.


When do you not pay stamp duty tax?

First-time buyers

If you’re a first-time buyer, you’re able to claim significant relief from Stamp Duty.

For first residential homes that cost up to £425,000, no Stamp Duty tax is paid.

If your first home costs up to £625,000, then you’ll pay a Stamp Duty rate of 5% on the amount between £425,001-£625,000.

For any property that costs more than £625,000, first-time buyers will not be able to claim Stamp Duty Tax relief and will be required to pay the same amount of Stamp Duty as standard home buyers.

Homes below the stamp duty threshold

In cases where the house you’re looking to buy costs less than the Stamp Duty threshold (i.e. £250,000 since 23rd September 2022), then no Stamp Duty will be paid as the tax rate is 0%.

Other circumstances

There are a number of other circumstances where Stamp Duty is not payable on a property:

  • You inherit a property;
  • The property is transferred to you as part of a divorce settlement;
  • You’ve received the property through equity transfer and no money has exchanged hands;
  • You buy a freehold property for less than £40,000; or
  • You buy a new or assigned lease of fewer than seven years, as long as the amount you pay is below the residential Stamp Duty threshold.

Examples of stamp duty tax on additional residential properties

For those fortunate enough to be able to purchase a second home, you will be required to pay a 3% uplift on all standard Stamp Duty rates that are applicable to a first home.

For owners of multiple residential properties, the Stamp Duty tax rates become:

The first £250,000 – 3%
The next £625,000 (The portion of the property price between £250,001-£925,000) –  5%
The next £575,000 (The portion of the property price between £925,001-£1.5 million) – 13%
The portion of the property price over £1.5million – 15%

It’s important to be aware of this distinction as the Stamp Duty fees can have a considerable impact on your budget.

Buying property? Get advice from Waldrons

Buying your first (or second) property can be an exciting step, so don’t let Stamp Duty obligations trip you up. If you have any queries about Stamp Duty and what you will be required to pay on your next property purchase, then get in touch with our expert team at Waldrons.

Between us, we have decades of combined experience in dealing with the legalities around buying and selling property. Why not get started by arranging a free, no-obligation phone consultation with one of our friendly team?

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