What is Stamp Duty?
Stamp Duty—or Stamp Duty Land Tax (SDLT) in official terms—is charged to buyers when purchasing a residential property or a piece of land that costs over £250,000. This tax applies to both freehold and leasehold properties, whether you’re buying outright or with a mortgage.
Stamp Duty CHANGES
If puchasing a property after 23 September 2022, buyers will not pay SDLT on properties that cost up to £250,000 across England and Northern Ireland. There were different rates for properties purchased up to 23 September 2002 view details →
How much is Stamp Duty?
Stamp Duty is calculated based on the value of the home. This table explains how the rate you pay varies depending on the price of the property.
|Purchase price||Main residence||Additional homes|
|£0 – £250,000||0%||3%|
|£250,001 – £925,000||5%||8%|
|£925,001 – £1.5m||10%||13%|
MAKING SENSE OF THE PRICE BRACKETS
If you buy a property for £400,000 as your main residence, the Stamp Duty would be 0% on the first £250,000 and 5% on the remaining £150,000 (£5,000) so in total you would pay £5,000.
If you are purchasing a property costing £40,000 or more, which is not considered your main residence, you must pay an increased rate of tax (or additional dwelling supplement) of 3%. Anything other than your main residence is classed as a ‘second home’. This could be a holiday let, a property bought as an investment or somewhere you are helping another family member to buy—even if your main home is overseas. This charge does not apply to caravans, mobile homes, houseboats or plots of land.
Whilst Stamp Duty is charged on a tiered basis, the 3% surcharge effectively works as a slab tax. This means that if you buy a second home with a purchase price of £400,000, the additional surcharge would be £12,000 (three per cent of the entire price). This is in addition to the £7,500 Stamp Duty bill that would need to be paid on a home of this value, bringing the total payable to £19,500.
It is important to remember that you will not be liable for the 3% surcharge if the property you are buying replaces your main residence, even if you own additional properties at the same time (such as a second home or a flat you rent out). If you dispose of your previous main residence within 3 years you may be eligible for a refund. You must apply for any repayment within 12 months of disposing of your old main residence. However, this can be a complex area and you should seek advice from a solicitor or conveyancer.
First time buyers purchasing their first home for £425,000 or less will pay no SDLT. Where the purchase price is over £425,000 but does not exceed £625,000 they will pay 5% on the amount above £425,000.
Paying Stamp Duty
You must file an SDLT return and pay the tax within 14 days of taking possession of your new property. In most cases your solicitor or conveyancer will help you but if not, you will need to contact HMRC directly to make payment.
If you fail to make payment within 30 days, HMRC may charge you a penalty fee and/or interest. They accept several different payment methods including online, at your bank or building society or you can pay by cheque.
Additional rate refunds
If you purchase a new home but there’s a delay in selling your previous residence, you will still be liable to pay higher Stamp Duty rates for additional properties as effectively you’ll own two properties. However, you can request a refund for the amount above the normal Stamp Duty rates if:
- you sell your previous main residence within three years
- 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)
Are there any exemptions?
You may be eligible for tax relief in certain situations, which can reduce the amount you pay. For example, Stamp Duty Land Tax does not apply if you have been left a property in a will or received it as a gift, however other taxes might apply such as inheritance tax. You will also be exempt if the property has been transferred to you following a divorce, separation or the end of a civil partnership. Visit the gov.uk website for the full list of reliefs and exemptions.
Land and Building Transaction Tax (LBTT)
|Property cost||Main residence||Additional homes|
|£0 – £145,000||0%||4%|
|£145,001 – £250,000||2%||6%|
|£250,001 – £325,000||5%||9%|
|£325,001 – £750,000||10%||14%|
An additional amount of LBTT known as Additional Dwelling Supplement (ADS) must be paid on purchases of additional properties over £40,000. This is where the purchaser is not replacing their main residence, e.g. buy-to-let properties and second homes.
Affected transactions will result in an additional 4% blanket tax being charged on the full purchase price of the transaction. For example, if you buy a second home with a purchase price of £300,000, the additional surcharge would be £12,000. This will need to be paid in addition to the £4,600 LBTT that would need to be paid on a home of this value, bringing the total amount payable to £16,600.
If you decide to purchase a home with a partner or a friend before selling your existing main residence, you will be liable to pay the additional 4% surcharge. However, you may be able to claim this back if you meet the refund criteria.
First-time buyers in Scotland are exempt from paying Land and Buildings Transaction Tax (LBTT) on properties up to the value of £175,000. This means that if you’re purchasing your first home at a cost of £300,000, the tax payable would be 0% on the first £175,000, 2% on the next £75,000 (£1,500) and 5% on the remaining £50,000 (£2,500). In total, you would pay just £4,000.
Paying Land and Building Transaction Tax
Your solicitor will usually make the arrangements for your LBTT to be paid. However, if they don’t, land tax returns can be submitted using Revenue Scotland's online portal or manually by completing a paper form and paying by cheque. Revenue Scotland does not accept payment over the phone or by cash. If you fail to make payment within 30 days of taking possession of your new property, you will be charged a penalty fee. Full details of how to make a payment can be found on the Revenue Scotland website.
Additional rate refunds
In instances where the Additional Dwelling Supplement (ADS) has been paid prior to your previous residence being sold, to qualify for a refund you must:
- have bought a dwelling which you intended to inhabit as your main residence
- dispose of your previous main residence within an 18-month period (beginning with the day after the effective date of the next main residence purchase transaction)
- have been the only owner on the title deeds of the previous main residence
You can claim repayment for ADS via the SETS portal, by amending your original LBTT return.
Are there any exemptions?
There are several types of land transactions which are specifically exempt from LBTT or that offer tax relief. If a piece of land or a building has been gifted, or the ownership transferred to you (e.g. in a will) you will not have to pay land tax. You will also be exempt if the property has been transferred to you as a result of divorce, separation or the end of a civil partnership. Visit the Revenue Scotland website for the full list of LBTT exempt transactions.
Land Transaction Tax (LTT)
|Property cost||Main residence|
|£0 – £225,000||0%|
|£225,001 – £400,000||6%|
|£400,001 – £750,000||7.5%|
|£750,000 – £1.5m||10%|
Buyers purchasing an additional residential property worth £40,000 or more may need to pay the higher residential rates. If you're replacing your main residence the higher rates may not apply.
|Property cost||Higher residential rate|
|Up to £180,000||4%|
|£180,001 – £250,000||7.5%|
|£250,001 – £400,000||9%|
|£400,001 – £750,000||11.5%|
|£750,000 – £1.5m||14%|
If you already own a home and decide to jointly buy an additional property with a partner or a friend before selling your main residence, you are likely to be liable to pay the higher rate of tax. However, you may be able to claim a repayment if the relevant conditions are met.
Paying Land Transaction Tax (LTT)
Your solicitor should be registered with the Welsh Revenue Authority (who are responsible for collecting LTT) and will be able to make the transfer on your behalf as part of the conveyancing process.
Additional rate refunds
If you make your second home your main residence within 36 months of buying it (you sell the first property), you will be able to claim back the higher rates you paid. This can be done by contacting the Welsh Revenue Authority and providing them with:
- the Unique Transaction Reference Number (UTRN)
- the taxpayer's name and address
- the reason for a refund/amendment
- a description of any amendments to the return
- whether the amendment alters the amount of tax due
- the effective date of the amendment/repayment claim
- the amount to be repaid
- the name of the account holder
- your bank/building society account number and sort code
- the name and address of your bank or building society
You will also need to include a declaration to confirm that you have the authority (or have been authorised to complete this amendment on behalf of the buyer) and declare that the information provided is to the best of your knowledge correct and complete.
Are there any exemptions?
There are five transactions which are exempt from LTT, these include acquisitions by the Crown, transactions in connection with a divorce or dissolution of a civil partnership and where a property has been gifted. Visit the Welsh Government's website for the full list of LTT exempt transactions.
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