Stamp duty: when do you pay it and how much is it?

If you’re buying a home worth £250,000 or more, or a first home priced over £300,000, you will have to pay stamp duty land tax (SDLT).

This article will tell you more about what stamp duty is, whether you'll need to pay it, and how to calculate it.

In this article we will cover:

• What is stamp duty?
• Do I need to pay stamp duty?
• Stamp duty when buying your next home
• Do first-time buyers pay stamp duty?
• Buy-to-let/second homes and stamp duty
• What stamp duty is payable on business property
• When do you pay stamp duty?
• How do you pay stamp duty?
• Am I eligible to claim a stamp duty refund?

What is stamp duty?

Usually when we talk about stamp duty, we mean stamp duty land tax (SDLT).

This must be paid when buying property in England and Northern Ireland.

In Wales there is Land Transition Tax (LTT) instead, while Scotland has Land and Buildings Transition Tax (LBTT), but all three work in broadly similar ways.

Generally, the more expensive the property you’re buying, the more stamp duty you will pay.

Do I need to pay stamp duty?

If you’re buying a property or a piece of land in the UK, then in most cases you will have to pay stamp duty (or the corresponding tax in Wales and Scotland).

For residential property or land, stamp duty is payable if the price is £250,000 or more.

However, there is relief for first-time buyers (see below). If you're unsure about the impact of stamp duty on your purchasing power, talk to your mortgage broker.

Stamp duty when buying your next home

If you already own a home and are selling it to buy your next, then you will pay stamp duty at the normal rate.

Stamp duty is charged in ‘slices’, so you pay a certain rate on the part of the property’s value that falls within that slice.

You can see how it works in this table:

So for a property bought for £400,000 you would pay nothing on the first £250,000, then 5 per cent (£7,500) on the next £149,999.

Do first-time buyers pay stamp duty?

If you’re buying a home for the first time you’ll get stamp duty relief.

This means you won’t pay any stamp duty on the first £425,000 provided the property price is £625,000 or less. Above the £425,000 threshold, stamp duty is charged at 5 per cent.

So if you were to buy a home for £500,000 your stamp duty would be calculated at 5 per cent of £74,999 – so you’d pay just under £3,750.

If the property is over £625,000, follow the stamp duty rules for non-first time buyers (see above).

Stamp duty on buy-to-let and second homes

If you’re buying another property to let, or a second home (i.e. not selling your main home) then your stamp duty will be 3 per cent higher at each slice.

Stamp duty on non-residential property

For non-residential property (e.g. shops or office buildings) stamp duty is payable if the price is £150,000 or more.

You can find out more about this kind of stamp duty on the HMRC website.

Ask your mortgage broker about the impact of stamp duty on your purchase price.

If you found this article helpful, you might also find our article about stamp duty on shares informative, too.

When do you pay stamp duty?

Typically you have 14 days to file your stamp duty land tax return and pay any stamp duty owed.

If the SDLT return and payment are not received within 14 days of the property purchase date, HMRC may charge penalties and interest on top of the owed taxes.

How do you pay stamp duty?

The solicitor handling your property purchase often assists with submitting the SDLT return and payment on your behalf, but you can also do it yourself.

However, the ultimate responsibility falls on you as the buyer to ensure timely filing and payment.

You must still submit a return (unless you are exempt) even if you won’t need to pay any stamp duty.

Am I eligible for claim a stamp duty refund?

You may qualify for a partial refund on previously paid Stamp Duty Land Tax (SDLT) when purchasing a new primary residence.

This potential refund applies if you did not immediately sell your previous main home, but did sell it within 3 years of purchasing the new property.

The eligible refund would only be for the additional 3% surcharge for a second home, not the standard stamp duty land tax amount.