Stamp Duty

Stamp duty explained

Should the property you purchase cost more than £125,000 you will be liable to pay ‘Stamp Duty Land Tax’. At first Stamp Duty can seem a little complicated so we have broken it down below to help you understand just how much (if any) stamp duty you will need to pay.

So what is stamp duty?

Stamp duty is a tax imposed by the govermnet that is payable on any property over the price of £125,000. The fee is payable whether you are buying a freehold or leasehold.

The fee you will pay will be reliant on the purchase price. Below is a table of the purchase price along with the fee you will be liable to pay.

Property value Stamp duty rate
Up to £125,000         Zero
The next £125,000 (the portion from £125,001 to £250,000)          2%
The next £675,000 (the portion from £250,001 to £925,000)          5%
The next £575,000 (the portion from £925,001 to £1.5m)          10%
The remaining amount (the portion above £1.5m)          12%

The stamp duty you may be liable to pay could be a sizeable amount, so it is important that you factor this expense into your budget whilst looking at properties to buy.

TOP TIP: If the property you are looking to purchase falls just above one of the brackets above then it would be wise to negotiate a sale price at slightly less, so as to pay a higher stamp duty fee.

First time buyers

You can claim a discount (relief) so you don’t pay any tax up to £300,000 and 5% on the portion from £300,001 to £500,000.

You’re eligible if you, and anyone else you’re buying with, are first-time buyers.

If the price is over £500,000, you follow the rules for people who’ve bought a home before.

Second homes

Stamp duty charges on second homes is slightly higher. Whether you are looking to rent or use for any other purpose their will usually be an extra fee of 3% to pay on top of the standard stamp duty shown in the table above. It is important to remember that should your name be on the deeds of any other property then you will be liable to pay stamp duty on any new property purchase were your name will be on the title deed.

Should you own a property which you rent out and wish to sell the house which you live in to buy another to live in then you will not have to pay any extra stamp duty.

If the sale of your new property completes before you have sold your own property then you will have to pay the extra stamp duty charge, although you can claim this back if you sell your old home within 36 months.

New builds

Stamp duty it is worth bearing in mind that any fixtures and fittings associated with a new build, that can be considered attached to the building will be taken into account whilst calculating stamp duty. Stamp duty is not applicable to furniture can be removed from the property (i.e. carpets and curtains) are not taken into account during the calculation.

Shared ownership properties

Again Stamp duty will apply to the share of the property you are purchasing. You can pay the full amount due on the full price of the house should you be thinking of buying more shares of the property in the future.

When do I pay?

The Stamp duty must be paid within 30 days from the date of completion. In most cases your solicitor/conveyancer will take care of the payment, although it is worth checking to ensure no money is owed by yourself once the property is sold. Fines can be imposed by the government if you are late with the payment.

Exemptions for Stamp duty

Some property transactions are exempt from Stamp Duty:

• If the property is a gift
• If the property is left in a will
• A divorce or separation where one person is transferring their share to the other
• Purchases of a freehold property for less than £40,000

More information can be found on the Gov.uk website.