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Stamp Duty

What is stamp duty?

Stamp duty land tax (or Land and Buildings Transaction Tax in Scotland) is a lump-sum tax that anyone buying a property or land costing more than a set amount has to pay. The rate of tax you'll pay varies depending on the price and type of property (we'll focus on residential buildings, rather than commercial).

Changes to stamp duty were announced in the Chancellor's Autumn Statement in 2014. Stamp duty has been changed - the slab system (where you'd pay a single rate on the ENTIRE property price) has been swept away, and in its place is a more progressive system.

Under the new system, you'll only pay the rate for the proportion of the property that's at that rate.

An example is below:

Old system:

You would have paid 1% on a property between £125,000 and £250,000, between £250,000 and £500,000 you'd pay 3%. So because the purchase price is over £250,000, you'd have paid 3% on the entire purchase price, despite only being £50,000 above the threshold. Thus, you'd have paid £9,000 in stamp duty.

New system:

You pay nothing below £125,000, which is £0
You pay 2% on between £125,000 and £250,000, which is £2,500
You pay 5% on the value of the property above £250,000, which is £2,500

So in total this means you'll pay £5,000 (£0+£2,500+£2,500).

calculate

How do I work out how much stamp duty I will need to pay?

As the price you pay for a new property increases, so do the rates of stamp duty. You pay a percentage of the cost, and the rate payable leaps up at a set of thresholds - but, you only pay the proportion of the purchase price that's actually above the thresholds at the higher rate. The Chancellor has now announced an incremental 3% stamp duty surcharge on Buy-To-Let property purchases over residential purchases. This will be introduced from April 2016. To find out the best ways to beat the new surcharge click here. The figures for this charge can be found in the table below.

Property Value
Standard Rate of Stamp Duty
Buy-to-let/ Second home rate (April 2016)
Up to £125,000
0%
3%
£125- £250,000
2%
5%
£250 - £925,000
5%
8%
£925 - £1,500,000
10%
13%
Over £1.5m
12%
15%

Source: HMRC

How do I pay stamp duty?

If you are buying in the UK you have 30 days from the date of completion/date of entry (when all the contracts are signed and dated and you get keys) to pay stamp duty or transaction tax. If you do take longer than the 30days you could face a fine and possibly interest on top, so try to ensure you do not miss the payment date!

Your solicitor may sort this out and push you to pay the bill straight away.

However, it's legally your responsibility to ensure your stamp duty/transaction tax is paid. If you are doing this yourself, click here to find out more.

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