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How much is stamp duty and when do I pay?

This tax on home buyers is a major cost to budget for when buying a new property. But now a stamp duty cut has been announced from July 2020 until end March 2021. Whether you're buying your first home, you're a home mover or buying a second property, we take you through everything you need to know about stamp duty, how much it costs and when you need to pay.


What is stamp duty and who pays it?


Stamp duty, or Stamp Duty Land Tax if you want to use the official jargon, is a levy that you pay to HM Revenue & Customs when you are buying a home.

It is paid by the person buying a property and how much you’ll pay depends on where the property is, how much you are paying for it and whether or not it is your only property.


Who pays stamp duty?


It is always the home buyer who pays stamp duty, not the seller. Usually, your solicitor will pay it on your behalf as part of the purchase process.

In England and Northern Ireland, from 8th July 2020 – 31st March 2020, you don’t have to pay any stamp duty if you are purchasing a property worth less than £500,000, unless it is a second home. If you are buying an additional property, then you pay stamp duty of 3% on properties worth up to £500,000 (and higher rates above this value).


How much is stamp duty?


The rate of stamp duty you pay depends on what price threshold your property falls into and where the property is – there are different rates in Scotland and Wales compared to England and Northern Ireland. It also depends on whether you have to pay a surcharge because you are purchasing a buy-to-let or second home.


How much is stamp duty in England & Northern Ireland?

New rates come in effect July 8th, 2020 – March 31st, 2021


PURCHASE PRICE OF PROPERTY

STAMP DUTY RATE

STAMP DUTY RATE FOR ADDITIONAL PROPERTIES

Up to £500,000

0%

3%

Over £500,000 to £925,000

5%

8%

Over £925,000 to £1.5m

10%

13%

Over £1.5m

12%

15%


How much are Stamp Duty Rates in Scotland?

New rates in effect July 15th, 2020 – March 31st, 2021

PURCHASE PRICE OF PROPERTY

STAMP DUTY RATE

STAMP DUTY RATE FOR ADDITIONAL PROPERTIES

Up to £250,000

0%

4%

£250,000 to £325,000

5%

9%

£325,000 to £750,000

10%

14%

Over £750,000

12%

16%

Stamp duty is known as ‘land and buildings transaction tax’ (LBTT) north of the border.


What are the Stamp Duty Rates in Wales?

New rates in effect July 27th – March 31st, 2021

PURCHASE PRICE OF PROPERTY

STAMP DUTY RATE

STAMP DUTY RATE FOR ADDITIONAL PROPERTIES

Up to £180,000

0%

3%

£180,000 – £250,000

0%

6.5%

£250,000 to £400,000

5%

8%

£400,00 to £750,000

7.5%

10.5%

£750,000 to £1.5m

10%

13%

Over £1.5m

12%

15%


In Wales stamp duty is called Land Transaction Tax. It is levied at slightly different rates to stamp duty and on different thresholds.

Do I qualify for first-time buyer relief?

With the introduction of temporary stamp duty rates in England from 8th July, Scotland from 15th July and Wales from 27th July until 31st March 2021, first time buyer stamp duty relief has no practical effect during the temporary period since the starting threshold is greater than that provided by the first-time buyer relief.

Stamp duty surcharge on additional properties

Since April 2016 there has been a stamp duty surcharge for anyone buying additional properties. If, at the end of the purchase process, you will own two or more properties then you have to pay a surcharge on top of your ordinary stamp duty bill.


What stamp duty rates apply to leasehold homes?


In most cases, you will pay stamp duty on the purchase price of a leasehold home at the standard rates. But, if you are buying a brand-new property which has a new lease, or an older property that has just been divided up and therefore new leases have been issued (known as ‘unassigned leases’), you may need to pay an additional stamp duty charge.

This 1% extra charge will only apply if the total value of the rent you have to pay over the lifetime of the lease exceeds £125,000. HMRC has a calculator on its website which you can use if you think this charge might apply to your purchase.


Does stamp duty apply to fixtures and fittings?


Stamp duty does NOT apply to removable fixtures or “chattels” like freestanding furniture, carpets or curtains. But, it does apply to fixtures and fittings like bathroom and kitchen fittings, and built in wardrobes, which are attached to the building.

You can reduce your stamp duty bill by subtracting the value of removable fittings from the total price of the property. For example, if carpets are included in the sale of a flat, the buyer and seller must agree a realistic price which reflects their age and quality, and then subtract it from the total price to calculate the stamp duty

Buyers have been known to try to reduce their stamp duty bills by massively exaggerating the value of fixtures, but HMRC has cracked down on this. You should expect to be able to justify the value of the fixtures to the taxman.



Are there any other exceptions?


There are a number of other stamp duty exceptions including:

· Homes that are registered to companies rather than individuals and cost more than £500,000. These have a stamp duty rate of 15%.

· Charities may be able to get relief from stamp duty when they buy land and property for charitable purposes.

· Right-to-Buy transactions may qualify for stamp duty discounts

· Registered social landlords may be able to get relief if they are buying land or property.

· Zero-carbon homes (including flats) under £500,000 are exempt from stamp duty. Ones worth over £500,000 have their stamp duty bill reduced by £15,000.

· A full list of stamp duty exemptions and reliefs are listed on the HMRC website.


How do I calculate my stamp duty bill?


Stamp duty is calculated in the same way income tax works. For example, if the agreed price of a home being purchased by an existing homeowner is £550,000, stamp duty is calculated as follows:

0% on the first £500,000 = £0 5% on the next £50,000 = £2,500 Total stamp duty payable = £2,500


Can I add stamp duty to my mortgage?


If you can’t afford your stamp duty bill, then you do have the option to borrow more on your mortgage to cover the tax bill. You simply need to calculate how much stamp duty you will owe and increase your mortgage borrowing to cover it.

Just be aware that you’ll pay interest on that extra borrowing, which over the average 25-year term of a mortgage can add up.

Also, adding your stamp duty to your mortgage could mean you end up with a higher interest rate if it pushes your loan-to-value up significantly.


How do I pay stamp duty?


You have 14 days after you complete on the purchase of a property to file a return to HMRC and pay any stamp duty that is due.

Your solicitor or conveyancer will usually calculate and pay your stamp duty bill on your behalf. They will normally submit your return and pay the stamp duty on completion day, having collected the money from you in advance.