What is stamp duty?

Stamp duty is a form of tax that you may be required to pay when buying a residential property or piece of land in England and Northern Ireland. In Scotland and Wales, stamp duty is referred to as ‘land and buildings transaction tax’ and ‘land transaction tax’ respectively.

How much is stamp duty?

How much stamp duty you pay will depend on the purchase price of your new home. There are different rules for first-time home buyers and those who already own a home.

For example, if you’re a first-time buyer, you don’t need to pay stamp duty if the property you’re buying is priced below £300,000. If it is £300,001 or above, then you’d need to pay 5% stamp duty tax. A first-time buyer is classed as someone who is buying either a leasehold or freehold property for the very first time.

If you’re a second-time buyer, you’ll need to pay stamp duty tax for homes priced much lower. As well as the price of your home, how much stamp duty tax you pay will depend on whether the property is going to be your main residence or an additional property you own.

Here’s how the different bands look:

Purchasing a main residence property
Property price band (£)	Stamp duty tax rate (%)
Between £40,001 and £125,000	0%
Between £125,001 and £250,000	2%
Between £250,001 and £925,000	5%
Between £925,001 and £1.5million	10%
Over £1.5million	12%

For example, if the property you’re buying is priced at £225,000, your stamp duty tax rate will be 2% of this. This equals £4,500, which would be your total stamp duty tax owed.

Purchasing an additional property
Property price band (£)	Stamp duty tax rate (%)
Between £40,001 and £125,000	3%
Between £125,001 and £250,000	5%
Between £250,001 and £925,000	8%
Between £925,001 and £1.5million	13%
Over £1.5million	15%

For those people buying an additional property, the stamp duty tax rates are higher.

To help you work out exactly how much stamp duty you need to pay, there are calculators available online. We’d recommend giving the Money Advice Service Stamp Duty Calculator a try.

What about the stamp duty holiday?

In 2020, the government launched the stamp duty holiday, which temporarily increased the amount at which stamp duty is usually paid. It was designed to help home buyers who may have taken a financial hit as a result of the Covid-19 pandemic. It was recently announced that the stamp duty holiday would be in place until October 2021, helping people to save thousands of pounds in stamp duty tax.

For home purchases between now and 30 June 2021, you won’t need to pay stamp duty tax for a property priced below £500,000. After this time until 30 September 2021, this changes to properties priced up to £250,000.

So, if you’re thinking of buying your second home, now might be the best time to move ahead. After all, you could be saving yourself a lot of money by avoiding the stamp duty tax.

When and how should stamp duty be paid?

You’ll have 14 days to file a stamp duty land tax return and pay any money owed. If you don’t submit a return and pay the stamp duty tax within this timeframe, HMRC may penalise you with interest.

This may sound worrying, but the process is usually very straightforward. Your solicitor will usually handle your stamp duty payments for you as part of the process of buying a house. If you have any questions, you should ask them to put your mind at ease.

You can also make the payments yourself if you’d rather. Whichever option you choose, it’s your responsibility as the buyer to make sure your stamp duty is paid and submitted on time.

More information on how to pay stamp duty tax can be found on the GOV.uk website here.

How could stamp duty be avoided?

Aside from the stamp duty holiday, there are other cases in which stamp duty can be deemed as not payable or reduced. If you’re thinking of buying a new home, see if any of the below circumstances apply to you to see if you could reduce the amount of stamp duty you pay.

1. Slightly over the band. If the home you’re buying is only just in the higher band, then you should ask the seller or estate agent if they would accept a slightly lower price. That way, you can bring your stamp duty payment down.

2. Transfer of property. If you’re going through a divorce or separation, you can avoid stamp duty by transferring a proportion of your home’s value to them.

3. Transfer of deeds. If you transfer the deeds of your property to someone else, they won’t need to pay stamp duty. This is often done as a gift or part of a will.

The full list of stamp duty exemptions can be found on the GOV.uk website.

Do you pay stamp duty on a new build home?

If you’re a first-time buyer, no. However, if you’re buying a new build home that’s not your first home, then the rules are the same and you will have to pay stamp duty. Though, there are different rules if you’re buying a new build home through a scheme, such as shared ownership.

Buying a new home can be stressful, with so many things to understand. We hope this blog has helped to put your mind at ease when it comes to getting to know more about the rules of stamp duty in England. Remember, if you have any questions, the Bloor team is here to help.