Stamp Duty; What is it? And do I have to pay it?

22 April 2024

Stamp Duty; What is it? And do I have to pay it?

Most of us move home only a few times in a lifetime so we can forget the process and some of the associated costs involved. We thought we’d take a quick look at one of your biggest expenses, Stamp Duty, to give you a basic overview.

If you buy a property over £250,000 in the UK you will be liable for Stamp Duty Land Tax (SDLT). You will pay SDLT on your main property and on any additional property you buy, for example a buy to let property or a holiday home. Interesting fact: The tax was introduced in 1694 as a temporary measure to raise finances for the war against France. However, it proved so successful as a means of raising revenue for the government that it still endures today!

 

How much will I pay?

The good news for first time buyers is that you won’t have to pay SDLT if you are buying a property for less than £425,000. For everyone else you’ll pay the tax on any property purchase over £250,000. The rate of tax varies depending on the purchase price of the property.

 

 

PURCHASE PRICE

MAIN RESIDENCE

SECOND HOME / ADDITIONAL PROPERTY

Up to £250,000 (£425,000 for first-time buyers) (3)

0%

3%

£250,001 – £925,000

5%

8%

£925,001 – £1,500,000

10%

13%

£1,500,001 +

12%

15%

 

 

Let’s look at a mortgage for £1 million to see the amount due illustrated in another way: 

You’ll pay:

  • £0-250k = 0% = £0
  • £250,001-£925,000 = £675,000 @ 5% = £33,750
  • £925,000- £1m = £75,000 @ 10% = £7,500
  • Total £41,250

 

First time buyers

 You can claim a discount if the property you are buying is your first home. This means you’ll pay: 

  • No SDLT upto £425,000
  • 5% SDLT on the portion from £425,001 – £625,000

You are eligible if you and anyone else you’re buying with are first-time buyer.

If the price is over £625,000, you cannot claim the relief and you must follow the rules for people who’ve bought a home before. 

If in doubt and for the most up to day information use the governments Stamp Duty calculator. Click here.

  

When do I pay?  

You have 14 days to pay any Stamp duty due. HMRC can charge you penalties and interest if you don’t submit a return in time. Fortunately, your solicitor will deal with the Stamp Duty and payment for you as part of the legals when you buy your property.

  

How do I fund Stamp Duty?

Stamp Duty can amount to quite a large bill depending on the purchase price of your property. It’s something you must consider before you decide how much you can afford to spend on a home.

Unfortunately, you can’t pay in instalments or use a credit card so you may need to use a portion of the money you have saved for your deposit.

If you use some of the money you have saved for your deposit or equity you may have in your current home to pay the Stamp Duty then this will increase the borrowing against your home. As you will be borrowing a larger proportion of the purchase price of the new property, your monthly payments will increase, and you’ll incur additional interest over the duration of the mortgage term.

Your adviser will look at all of this for you as part of the affordability process to ensure you are applying for the correct mortgage amount.

For more information on the cost associated with purchasing a home or to discuss your plans and ideas call 0203 745 5893 and speak to one of the team.