Understanding Stamp Duty

When you purchase a property, there are a number of financial considerations you’ll need to take into account. One of the more significant costs during the homebuying process is Stamp Duty, so it’s worth getting familiar with this from the outset so you’ll know exactly what you’ll need to set aside. 

What is Stamp Duty?

Stamp Duty is a tax levied on property purchases in England and Northern Ireland. For property purchases in Scotland and Wales, different taxes apply. Scotland’s equivalent is known as Land and Buildings Transaction Tax (LBTT), while in Wales, Land Transaction Tax (LTT) applies.

Who has to pay Stamp Duty?

You may be liable to pay Stamp Duty if you meet any of the below criteria: 

• Purchase a freehold property (ownership)

• Buy a new or existing leasehold property (lease from a landlord)

• Acquire land or property through a financial transfer (e.g. taking over someone else's mortgage)

Exemptions from paying Stamp Duty

There are a number of exemptions from paying Stamp Duty:

• If the property value falls below the current threshold, no Stamp Duty is due.

• First-time buyers (and anyone purchasing with them) are exempt from Stamp Duty Land Tax (SDLT) on properties valued under £425,000.

Calculating the amount of Stamp Duty you’ll pay

How much Stamp Duty you’ll pay depends on the property's purchase price and other factors. These include residency status, if a company is purchasing the property, and whether the buyer already owns another property. A tiered system applies, with tax rates ranging from 3% to 15% based on price bands.

You should also take into account the following:

• Buyers already owning a property may pay a higher rate for additional purchases.

• An extra 2% applies to non-UK residents on top of standard rates.

How to pay Stamp Duty and when to pay it

Your solicitor or conveyancer typically handles your Stamp Duty payment. The fee can be paid upfront, or included in their overall fees, depending on what has been arranged. Alternatively, you can file and pay online yourself on Gov.uk. 

You have 14 days after property purchase completion to submit your Stamp Duty return to HMRC.

Seeking additional guidance

For personalised advice regarding Stamp Duty, you should consider seeking independent tax and legal guidance from a qualified tax adviser. This is particularly recommended for complex purchases involving multiple properties, company purchases, or non-resident buyers. 

While they cannot offer tax advice, our mortgage advisers are happy to answer your questions related to the mortgage process, helping you find the right deal for your circumstances.