If you’re looking at buying a home, you may have come across the term ‘Stamp Duty Land Tax’.
This is a self assessed tax that you need to pay when purchasing a property. The rate that you pay depends on many factors such as the property price and whether you’re a first-time buyer.
In this article, Conveyancing Partner Michelle Petersen explains stamp duty in more detail and outlines what the current rates are.
What is Stamp Duty?
Stamp Duty Land Tax or SDLT is a form of tax that you pay when purchasing a property, much like the VAT that is paid on everyday items.
However, unlike VAT, Stamp Duty is variable meaning that it changes. Depending on the circumstances, the amount of SDLT you pay when you buy a property can be increased, reduced or not need to be paid at all.
SDLT only applies to properties in England and Northern Ireland. Scotland and Wales have separate systems for paying tax on properties.
Related: What is stamp duty in commercial property?
How much is Stamp Duty?
How much you’ll pay in Stamp Duty mainly depends on the purchase price of the property; but can also depend on whether:
- You’re a first-time buyer
- You already own a property
- You’re not a UK resident
I’ve covered all of these circumstances below.
How much is Stamp Duty for previous homebuyers?
Previous homebuyers (aka non-first time buyers) won’t pay any tax on the first £250,000 of the property price, but will pay 5% tax on anything between £250,001 and £925,000.
You’ll pay 10% tax on any money between £925,001 and £1.5 million, and 12% on anything above £1.5 million.
How much is stamp duty for first time buyers?
First time buyers can claim stamp duty relief, meaning that they’ll pay no SDLT on the first £425,000 of the purchase price and only 5% on the remaining portion above £425,001.
For example, if the property is worth £600,000 then you’ll only pay £8750 in stamp duty; as opposed to the usual £17,500.
First time buyer relief does not apply to properties worth above £625,000.
We’ve put together a free 32-page guide for first-time buyers, which covers everything from mortgages and property loans to completing and moving in. You can read it here.
How much is stamp duty on a second home?
Stamp Duty will usually cost you an extra 3% on second homes.
However, additional stamp duty can be refunded if the first property is sold within 36 months of purchasing the second property Further guidance on Stamp Duty refunds can be found through the government website.
Who does and doesn’t qualify to pay the extra 3% in stamp duty can be complex, especially if two people are involved in buying the property.
For further guidance on the tax implications of second homes, you can read our dedicated article here. Or, if you want more tailored advice, you can get in touch with our Tax team here.
How much is stamp duty for non UK residents?
If you have not been in the UK for 6 months during the 12 months prior to your purchase, then a 2% surcharge will usually be added to the stamp duty.
This 2% can be in addition to any other extra SDLT that has been applied, such as the added 3% for second homes.
How do you calculate stamp duty on multiple properties?
If you’re buying multiple properties at once, then stamp duty works a little differently and you may be entitled to Multiple Dwellings Relief (MDR).
The relief works by averaging the price of the properties and paying stamp duty on the average price of each property. However, the purchaser has to pay above 1% tax.
For instance, 2 houses purchased for £1 million and £100,000 respectively would be taxed as if they were both purchased for £550,000, Saving the buyer £11,250 in SDLT.
Find out more about Multiple Dwellings Relief here.
What happens if you don’t pay stamp duty?
If Stamp Duty is not payed within 14 days of the transaction, then interest may be charged on the tax amount owed. The interest will start after the 14 days have passed and end once the SDLT has been payed.
While the penalties for late filing can be appealed, the interest charged due to late payment cannot.
What are the penalties for late Stamp Duty payments?
If a client is not represented by a firm, then they’ll need to send paperwork showing how much SDLT they owe. Penalties for late filing depend on how late filings are made, and are as follows:
- £100 penalty – Up to 3 months late
- £200 penalty – Between 3 and 6 months late
- Unfixed fine, up to the amount of SDLT due – More than 6 months late
What are the penalties for inaccurate Stamp Duty payments?
For any SDLT returns that are inaccurate and the HMRC deem it to be due to carelessness or deliberate behaviour then penalties may also be given.
When giving the penalty, HMRC take into account the seriousness of the offence and how helpful the party had been throughout the process.
It is therefore important that stamp duty payments are on time and accurate, which your solicitor will help you with.
Will stamp duty change in 2023?
Stamp Duty has been subject to lot of change in recent years. A combination of Post-Lockdown policy and changes within the conservative party leadership have resulted in the stamp duty land tax thresholds being varied often.
Fortunately, the current stamp duty land tax thresholds should now remain as they are until any potential government changes occurs.
This looks most likely to occur at the next general election, which will happen in January 2025 at the latest. Calculations for SDLT can be found here.
Stamp Duty at Frettens
SDLT can be confusing to calculate. However, we send out a useful form for any perspective buyers to fill out to help avoid any confusion This form breaks down all necessary factors we need to calculate the SDLT. We will calculate the tax payable based on the information you supply.
This will then be factored into the purchase price and will be included in your completion statement.
To receive your stamp duty form, you can get in touch below.
Conveyancing and Stamp Duty Solicitors
Our bright and experienced property team would be happy to assist you in the purchase of your home and in dealing with stamp duty, please feel free to direct any questions our way.
To get in touch, call us on 01202 499255 or fill out the form at the top of this page. We offer a free initial chat for all new clients.
If you’re not ready to chat to us, and want to learn more, you can read our complete guide to purchasing a home here.
All rates provided within this article are correct as of April 2023.
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