Stamp Duty Explained

You’ll need to pay Stamp Duty Land Tax (SDLT) when buying a property over a certain amount. We explain how stamp duty works, when it applies, how to pay it and the latest stamp duty rates.

  • What is stamp duty?
  • What is a stamp duty threshold?
  • How much is stamp duty now?
  • When does stamp duty apply?
  • When do you have to pay stamp duty?
  • What was the stamp duty holiday?
  • How to pay stamp duty
  • How can I calculate stamp duty?
  • How much stamp duty does a first-time buyer pay?
  • Stamp duty on second homes
  • Refund for higher rates of stamp duty
  • When do you not have to pay stamp duty?
  • Can I add stamp duty to my mortgage?
  • Stamp duty returns
Stamp duty is a tax that you need to pay when you buy a property in England or Northern Ireland. In Scotland, it’s known as Land and Buildings Transaction Tax, and in Wales it’s called Land Transaction Tax with rates set locally. The amount of stamp duty you pay is calculated using the purchase price of a property, not the amount you’re borrowing through a mortgage.
Stamp duty thresholds are simply the limits to when and which charges apply. If you buy a property for less than the base threshold, you won’t pay any stamp duty, whereas if the property you’re buying exceeds other thresholds, you’ll need to pay more.
Stamp duty was cut in Chancellor Kwasi Kwarteng’s September 2022 mini-budget.

Starting from 23 September, the threshold for stamp duty on residential properties has been raised from £125,000 to £250,000. First-time buyers are now exempt from stamp duty on home purchases up to £425,000 in England and Northern Ireland. They’ll pay 5% stamp duty on the portion of the property price from £425,001 to £625,000. The threshold for first-time buyers was previously £300,000.

Stamp duty bands now work like this:

  • Nothing on the first £250,000

  • 5% between £250,001-£925,000

  • 10% between £925,001 and £1.5 million

  • 12% above £1.5 million
    • Ordinarily, you should expect to pay stamp duty on all property purchases, including leasehold properties, shared ownership properties and purchases that don’t involve a mortgage. So when buying a home, you need to consider whether you’ll be able to afford the stamp duty on top of all the other costs involved.

    There’s only a few exemptions to the need to pay stamp duty, and these include:

  • When a portion of a home is transferred to a spouse or partner following a separation or divorce.

  • When you transfer the deeds of your home to another person as a gift.

  • If you fall into the first-time buyer category and are buying a home for up to £425,000.
    • Once you’ve bought your new home, you’ll need to file a stamp duty land tax return and pay the amount due within 14 days in England and Northern Ireland. If you don’t do this within 14 days, you’ll be charged penalty fees by HMRC.
    In response to the COVID-19 pandemic, the Government introduced a cut in stamp duty rates for England and Northern Ireland. The stamp duty holiday ended on 1 October 2021. Stamp duty then went back to pre-holiday rates, with the threshold starting at homes over £125,000.

    See more on the stamp duty holiday.
    Most of the time, your solicitor will sort this out for you. However, if you’d rather do it yourself, you’ll need to fill out and submit a stamp duty land tax return form. Make sure you do it within the set time to avoid penalty fees.
    See the table below. You can also use our stamp duty calculator.

    Stamp duty rates from 23 September 2022
    (Property price - Stamp duty rate)

  • up to £250,000 - Zero

  • portion from £250,0001 to £925,000 - 5%

  • portion from £925,001 to £1.5 million - 10%

  • remaining amount above £1.5 million - 12%
    • First-time buyers of properties costing £625,000 or less don’t have to pay stamp duty on the portion up to £425,000. The rate is then 5% on the portion from £425,001 to £625,000.

    If the property costs more than £625,000, first-time buyers pay the standard rates of stamp duty.
    Stamp duty on a second home or buy-to-let property costs an extra 3% on top of the standard stamp duty rates.

    You don’t have to pay the additional tax if your second home is a caravan, mobile home or houseboat.

    You’ll also need to pay the additional charge if you buy your new residential property before you’ve sold the previous one because, for a short time at least, you’ll own two homes (in these circumstances, there may be ways of claiming back the additional tax via your self-assessment tax return).

    The 3% surcharge applies to any of the following:

  • Your main home is abroad and the second home you buy is in the UK.

  • The second home is bought via a limited company.
    • If you bought a new home but were unable to sell your old home temporarily, you’ll be forced to pay a higher rate of stamp duty as you’ll own two properties.

    However, if you can sell (or even give away) your old home within three years of the purchase of your new one, you’ll be able to apply for a refund on the amount charged at the higher rate. That gives you some time to get things sorted, but you’ll still need to pay the higher rate to begin with.

    To be eligible for the refund, you must also claim within 12 months of selling your old home or 12 months of filing your stamp duty tax return, whichever of those is later.
    The most common example of not needing to pay stamp duty is when the property is bought for a price that’s lower than the stamp duty threshold. Other examples include you having the deeds transferred to you in a divorce or if you were inheriting the property through someone’s will.
    Yes, you can add your stamp duty payment to your mortgage, but you should be aware that it will incur interest charges. If your mortgage is over a 30-year term, this will add up, so it’s always cheaper to pay it straight away if you can. But it’s a common option if you’re unable to pay up front, alongside all the other fees you will have to pay.
    Your solicitor usually submits a stamp duty return for you. However, whether you use a solicitor or not, it’s your responsibility to ensure that the return is filed with HM Revenue & Customs within 30 days of the completion of the house purchase. If you don’t meet this deadline, you could be fined and charged interest on the unpaid amount.

    A return must still be submitted even if no stamp duty is payable.

    Guide provided by Comparethemarket

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