If you’re buying a property in England or Northern Ireland, you might have to pay stamp duty on the purchase. But what is stamp duty, how is it calculated, and what else do you need to know? This article covers some of the common questions about stamp duty from a conveyancer’s perspective.
Stamp duty is changing from 31st March 2025. You could make a significant saving by purchasing your property before this date, particularly if you’re a first time buyer.
Please note that different taxes are payable in Wales (Land Transaction tax) and Scotland (Land and Buildings Transaction Tax). This article focuses on stamp duty only.
For more information about the property buying process, download our free buyer’s guide to conveyancing:
What is stamp duty?
Stamp Duty Land Tax (SDLT), otherwise known as Stamp Duty, is a tax to the government that is typically paid when you buy a residential property over a certain price in England and Northern Ireland.
What is the threshold to pay stamp duty?
Stamp duty is typically paid when buying a property that costs £250,000 or more, or £125,000 or more from 31st March 2025.. There is a different threshold and rate for first time buyers, and higher rates for those buying a second property.
How much is stamp duty?
Stamp duty is calculated as a percentage of the purchase price (how much you pay for the property). For non-first time buyers buying a main residence (the property which you live in most of the time), there are several rate bands. The current rate bands are:
- You pay no stamp duty (0%) on the first £250,000 of the property’s value
- You pay 5% on the portion over £250,000 and less than £925,000
- You pay 10% on the portion over £925,000 and less than £1,500,000
- You pay 12% on the portion over £1,500,000
From 31st March 2025, the rate bands will be:
- You pay no stamp duty (0%) on the first £125,000 of the property’s value
- You pay 5% on the portion over £125,000 and less than £250,000
- You pay 5% on the portion over £250,000 and less than £925,000
- You pay 10% on the portion over £925,000 and less than £1,500,000
- You pay 12% on the portion over £1,500,000
Do first time buyers pay stamp duty?
Most first time buyers are eligible to pay a reduced amount of stamp duty. This is called first time buyer’s stamp duty relief. Currently, this looks like:
- If the property is worth less than £425,000, no stamp duty is paid
- If the property is worth more than £425,000 but less than £625,000, you will pay stamp duty at 5% of the value over £425,000
- For properties worth more than £625,000, the standard rates of stamp duty apply with no first time buyer’s relief
From 31st March 2025, things are changing and first time buyers may need to pay more stamp duty. This will look like:
- If the property is worth less than £300,000, no stamp duty is paid
- If the property is worth more than £300,000 but less than £500,000, you will pay stamp duty at 5% of the value over £300,000
- For properties worth more than £500,000, the standard rates of stamp duty apply with no first time buyer’s relief
How much is stamp duty on second homes?
If you already own a main residence and are buying a second property (such as a holiday home), you will have to pay an additional 5% stamp duty on top of what is already payable, no matter what rate band the property falls under. This is an increase from the previous rate of 3%, applicable from 31st October 2024. For second properties, the thresholds look like this:
- You pay 5% on the first £250,000
- You pay 10% on the portion over £250,000 and less than £925,000
- You pay 15% on the portion over £925,000 and less than £1,500,000
- You pay 17% on the portion over £1,500,000
Stamp duty isn’t payable if you’re buying a caravan, houseboat, or mobile home as a holiday home. Your conveyanacer will be able to advise you about stamp duty on second homes in more detail.
Do non-UK residents pay more Stamp Duty?
If you are not a UK resident, you will typically pay an extra 2% of the property’s whole value in stamp duty, on top of the typical rates outlined above and regardless of which rate band it falls under. You are considered to not be a UK resident if you have not spent at least six months of the twelve months before you purchase the property living in the UK.
Is stamp duty paid on non-residential property?
Yes, stamp duty is payable on non-residential land and properties, as well as mixed-use developments, at different rates. For freehold transactions, this looks like:
- No stamp duty is paid on the first £125,000 of value
- 2% stamp duty is payable on the next £100,000 of value (up to £250,000)
- 5% is paid on any value over £250,000
For new leasehold non-residential and mixed-use transactions, stamp duty is paid on both the purchase price of the lease (using the rates above) and the value of the annual rent paid (the net present value or NPV). On top of the rates above, you pay stamp duty based on the NPV at these rates:
- 0% if the NPV is below £150,000
- 1% on the portion of the NPV between £150,001 and £5,000,000
- 2% on the portion of the NPV over £5,000,000
Your conveyancer will be able to advise you about the total amount of stamp duty payable on non-residential or mixed-use transactions.
Do I need to pay Stamp Duty when transferring ownership (e.g. through inheritance or gifting)?
Whether stamp duty is paid when transferring property ownership depends on several factors.
- If you inherit a property in someone’s will, stamp duty is typically not payable
- If you are gifted a property which has no mortgage, you typically will not pay stamp duty
- However, if there is an outstanding mortgage on the property you are gifted, you will typically have to pay stamp duty on the amount of the mortgage that is over the stamp duty threshold
- If you are transferring the property as part of divorce or the dissolution of a civil partnership, stamp duty is typically not paid
When transferring a property as a gift, there are inheritance tax rules to consider (commonly known as the ‘seven year rule’). So, it’s a good idea to get advice before undertaking any transfer of ownership to ensure you’re in the best possible position.
Refunds when paying the higher rate of Stamp duty
In some cases, you may purchase a new main residence before you sell your current one. This means you will pay the increased rate of stamp duty for second homes. However, if you sell your previous main residence within three years (36 months) of purchasing the new one, you may be eligible for a refund of the additional stamp duty you paid.
When does stamp duty need to be paid?
After you have completed on the purchase of the property, you have 14 days to file your SDLT return and pay any stamp duty owed.
How do I pay stamp duty?
Your conveyancer typically deals with the payment of stamp duty. However, you remain responsible for ensuring that it is paid on time. Even if you do not need to pay any stamp duty, a return must still be filed.
What is stamp duty in Wales?
Stamp duty isn’t paid in Wales. Instead, if you’re buying a residential property in Wales, you’ll pay Land Transaction Tax (LTT) to the Welsh government. You can find out more about it on their website here.
What is stamp duty in Scotland?
Stamp duty isn’t paid in Scotland. Instead, if you’re buying a residential property in Scotland, you’ll pay Land and Buildings Transaction Tax (LBTT) to the Scottish government. You can find out more about it on their website here.
Can I pay stamp duty in instalments?
No, stamp duty must be paid in full within 14 days of completion.
Can I add the cost of stamp duty onto my mortgage?
Some mortgage lenders may allow you to add the cost of the stamp duty onto the total amount that you are borrowing. You must meet the affordability criteria, and be aware that you will pay interest on the amount over the term of your mortgage. It will also impact your loan-to-value (LTV) ratio, which may mean you have to pay a higher interest rate on the total amount you borrow.
Are there any penalties for paying stamp duty late?
Yes, if your stamp duty documents are not stamped by HMRC within 30 days of when they were signed and dated, you will have to pay a penalty. If they’re late by up to 12 months, you will pay a penalty of 10% of the duty, capped at £300. If they are late by 12 to 24 months, this rises to 20% of the duty. If they are late by more than 24 months, this rises to 30%. Interest is also payable to HMRC on top of the penalties if stamp duty is paid late.
Conclusion
Stamp duty can be a confusing topic. It’s tricky to know whether you’ll need to pay it, and how much, before you start the conveyancing process. However, your conveyancer is here to assist you and answer any questions you may have. At Setfords, we have expert conveyancers located nationwide who are here to help ensure your property buying process runs smoothly. Get in touch today to start your journey.
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