If you’re buying a home, you may well have to pay stamp duty. Here’s all you need to know about the tax – and a stamp duty calculator to help you work out your bill.
What is stamp duty?
Stamp Duty Land Tax, as it’s officially known, is the tax you have to pay when you buy a property in England or Northern Ireland.
The system was overhauled in 2014 following criticisms that it was distorting the market and had become too expensive, as the stamp duty thresholds at which the different rates were charged hadn’t risen in line with inflation.
The old ‘slab’ system, under which successively higher rates of the tax were applied to the whole purchase price of a property, was also replaced with a progressive system.
As a result of the changes, 98% of buyers pay less stamp duty when purchasing a home.
How is stamp duty worked out?
Stamp duty is charged at different rates on different portions of a property’s price.
No stamp duty is charged on the first £125,000 of the purchase price, with a rate of 2% charged on the portion between £125,001 and £250,000.
The rate then increases to 5% on the portion of the purchase price between £250,001 and £925,000, and 10% on the portion between £925,001 to £1.5m.
It is then charged at 12% on sums above £1.5m.
For example, if you bought a property costing £250,000, your total stamp duty bill would be £2,250, while if you bought one costing £500,000, it would be £15,000.
You can use our stamp duty calculator, immediately below, to work out exactly how much of the tax you would be liable for, based on your property’s purchase price. This does not take into account the stamp duty holiday, however.
To find out how much you could save during the stamp duty holiday, explore our interactive table further down this article, under Who is exempt from stamp duty?.
Stamp Duty rates only apply to the portion of the property price in each tax band and not the full purchase amount as it did prior to 4 December 2014.
Add your purchase price here: £
'Old rate' and 'new rate', above, refer to the stamp duty rates before and after the system was overhauled in 2014.
When do you pay stamp duty?
Stamp duty must be paid within 14 days of completing on your property purchase - in other words, when ownership legally changes hands - by sending a Land Transaction Return to HM Revenue & Customs.
Your solicitor or conveyancer will usually file this return and transfer the money on your behalf.
There are instances where a buyer doesn’t pay stamp duty or the amount due is reduced.
For example, if you are transferring a proportion of your home’s value to someone as part of a divorce settlement, or if the owner of a property transfers ownership of their home to someone else - either as a gift or through their will.
Who is exempt from stamp duty?
First-time buyer exemption
If you are a first-time buyer, you don’t have to pay stamp duty on the first £300,000 of your home purchase, as long as the total price doesn’t exceed £500,000.
If your home costs between £300,001 and £500,000, you will pay stamp duty at the 5% rate only on the slice of the purchase price above £300,000.
But if you are purchasing a property that costs more than £500,000, you will be liable for the tax like other buyers.
You can find further details on the first-time buyer exemption and who qualifies for it in our guide.
Stamp duty holiday
There is currently a stamp duty holiday in place on all properties costing up to £500,000.
The tax cut, which was introduced in July 2020 in a bid to boost the housing market, is due to end on 31 March this year.
Our stamp duty holiday explainer has all you need to know.
The latest media reports suggest that the government may extend the stamp duty holiday by three months.
What about stamp duty on second homes?
If you are buying a second home or a buy-to-let property, you will have to pay a stamp duty surcharge of 3% on the entire value of the property.
As a result, if you purchase an investment property costing £250,000, you will be liable for basic stamp duty of £2,500 once the stamp duty holiday ends, and a surcharge of £7,500, giving a total of £10,000.
You will also incur the 3% surcharge if you purchase a property to be your main home before you have completed the sale on your existing home, although you can claim the money back if you complete the sale within 36 months.
Our guide gives the lowdown on the 3% stamp duty surcharge.
Anything else you should know about?
A new 2% stamp duty surcharge is being introduced for overseas buyers.
The charge, which will come into force from 1 April 2021, will apply to all non-UK residents purchasing property in England and Northern Ireland.
Does stamp duty apply to purchases in Scotland and Wales?
Both Scotland and Wales have their own versions of stamp duty.
In Scotland, the tax is called the Land and Buildings Transaction Tax and it is charged on purchases of more than £145,000, with rates ranging from 2% to 12%.
Wales charges a Land Transaction Tax on the purchase of properties costing more than £250,000, with rates ranging from 5% to 12%.
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