What is stamp duty and when do I have to pay it?
Stamp Duty, also referred to as Stamp Duty Land Tax (SDLT), is the tax you owe when you purchase land or a property above a certain price (currently £125,000) in England and Northern Ireland. The rate varies from 5% to 12%, depending on several factors, including the price, whether the buyer is a first-time homeowner, and whether the home is buy-to-let or to be used as a residence. For non-UK residents, a 2% surcharge is added to stamp duty.
Assuming that the property is priced above the SDLT threshold, you will be expected to cover stamp duty when you:
- Purchase a freehold property.
- Purchase a new or existing leasehold.
- Purchase a property through a shared ownership scheme.
- Purchase a share in a property with a mortgage.
How is stamp duty calculated?
Excluding all exemptions and surcharges, stamp duty is calculated by taxing the value of a property in ‘bands’.
| Property Price Band (£) | Stamp Duty Rate |
|---|---|
| Up to £125,000 | 0% |
| £125,001 to £250,000 (the next £125,000) | 2% |
| £250,001 to £925,000 (the next £675,000) | 5% |
| £925,001 to £1,500,000 (the next £575,000) | 10% |
| Over £1,500,000 | 12% |
As a practical example, an individual who purchases a home for £350,000 will pay:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the next £100,000 = £5,000
Total Stamp Duty: £7,500
Important notes about this calculation:
- These rates apply when the property is your only residential home.
- If you already own other residential properties, a 5% surcharge is applied on top of these rates.
- If you are a first-time buyer, you may qualify for lower bands, resulting in a reduced stamp duty rate.
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