Basically, stamp duty is a tax you pay when you buy a home in England or Northern Ireland over a certain price (we’ll outline what happens in Wales and Scotland below).
The tax was first introduced in England during the reign of William and Mary in 1694 as a temporary measure to help pay for the war against France, but has existed since then in one form or another.
As the name suggests, proof of payment of the tax back then came with a physical stamp on a document.
Stamp Duty Land Tax (SDLT) – the levy as we know it now – has been in place since 2003.
When is it paid?
You may be charged stamp duty if you buy a freehold, leasehold or shared ownership property or if you transfer land or property in exchange for payment.
The current thresholds for when you have to pay are:
- £250,000 for residential properties
- £425,000 for first-time buyers of a residential property worth £625,000 or less
- £150,000 for non-residential land and properties
How much will I pay?
Currently there’s no charge on the first £250,000 you pay for your property.
On the next £675,000 (the portion from £250,001 to £925,000), the rate is 5%, then it’s 10% from £925,001 to £1.5m and 12% for any portion above £1.5m.
Here’s how the thresholds have changed over time…
Example
You’re moving house, and the new home you’re buying costs £350,000.
As you’re not a first-time buyer, the thresholds mean you will pay stamp duty on £100,000 of the total cost. At the 5% rate, the amount you owe will be £5,000.
As we mentioned above, first-time buyers can claim a discount on stamp duty as long as their home costs £625,000 or less, and won’t have to pay anything on the first £450,000 of their purchase.
You typically have 14 days to file your stamp duty return and pay any tax owed.
If the return is not received within the two-week period, you may face extra penalties and added interest from HM Revenue and Customs.
What if I’m buying additional properties?
If the property you’re buying won’t be the only home you own, you’ll usually have to pay an additional 3% on top of the existing SDLT rates.
I’m buying a non-residential property – what happens then?
You still have to pay stamp duty when buying non-residential property, such as shops or retail units, offices or pieces of land.
There’s no tax to pay on the first £150,000 of your purchase, but then similarly to residential buys, the amount you owe increases in thresholds.
You’ll have to pay 2% of any purchase price above £150,000 and up to £250,000, while any remaining amount over this threshold will attract a 5% tax.
Why is stamp duty unpopular?
Along with inheritance tax, stamp duty is one of the most unpopular taxes in the country.
Many economists see it as a deterrence for people to move home – including older people wanting to downsize – leading to a “gummed-up” housing market. Former housing secretary Robert Jenrick has previously described it as a “terrible tax”.
It also disproportionately impacts people in the South East and London where homes are more expensive.
An important note…
The stamp duty thresholds in place for residential purchases at the moment are only temporary, having been increased by former chancellor Kwasi Kwarteng in his 2022 “mini-budget”.
Jeremy Hunt said he will “sunset the measure” from 31 March 2025, when 0% thresholds will return to their previous levels of £125,000 for home movers and £300,000 for first-time buyers.
What about Wales and Scotland?
In Wales, you must pay Land Transition Tax and the threshold is:
- £225,000 for residential properties (if you do not own other property)
£225,000 for non-residential land and property
In Scotland, there’s Land and Buildings Transaction Tax.
The rate increases with the property’s purchase price. Buyers pay 2% between £145,000 and £250,000, 5% on anything between £250,000 and £350,000, 10% on anything between £350,000 and £750,000, and 12% on anything over that.
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