What's stamp duty?

Charley Burgess
November 2022
“I really can’t wait to pay Stamp Duty”, said no one ever. But just like April showers and Donald Trump’s next re-election campaign, Stamp Duty is something we just have to put up with. So, what is Stamp Duty and when do you have to pay it? Buckle up for our all-singing, all-dancing blog.

What is Stamp Duty for first time buyers?

Stamp Duty Land Tax (SDLT) is a charge that some buyers pay for securing a property (or land) above a certain price. Stamp Duty thresholds can change faster than a cheetah on rollerskates, but generally, first time buyers pay a different rate of SDLT, as we’ll explain later.

Stamp Duty gets its name from the long-ago practice of sticking an actual stamp on the legal documents. And the rest, as they say, can be Wikipedia’d.

What is the Stamp Duty threshold?

Historical trivia aside, today the standard threshold for paying Stamp Duty is £250,000. This follows an increase of the previous threshold (£125,000) as announced by the UK government in September 2022. However, when it comes to first time buyers it’s a different story.

Does a first time buyer pay Stamp Duty? 

In short: that depends. Here’s a summary of how much Stamp Duty you might expect to pay as a first time buyer:

  • First time buyers pay no Stamp Duty on homes worth up to £425,000. 
  • If the home is worth between £425,001 and £625,000, as a first time buyer you’ll pay 5% on the remaining amount.
  • For properties above £625,000 you’ll have to pay Stamp Duty at the normal rate (between 5% and 12% depending on the value).

Who pays Stamp Duty?

If you’re not a first time buyer and you’re selling your property to buy a new one, you’ll pay Stamp Duty on any purchase above £250,001. As we’ve covered, first time buyers only pay Stamp Duty if their purchase exceeds £425,000.

If you happen to be buying a patch of land or a non-residential property – like your mate’s garage or a cow shed – there is no Stamp Duty to be paid on the first £150,000. 

It’s also worth pointing out that Stamp Duty only applies in England and Northern Ireland; in Scotland, there is the separate Land and Buildings Transaction Tax (LBTT), while Wales has a Land Transaction Tax.

What are the Stamp Duty rates?

Aside from the aforementioned Stamp Duty rates for first time buyers, here’s a summary of how the normal Stamp Duty rate is affected by how much you spend on a home.

A table showing how much stamp duty is payable based on purchase price. On homes up to £250,000 there is no stamp duty. On homes between £250,001 and £925,000 you pay 5%. On homes between £925,001 and 1.5 million you pay 10%. On homes over 1.5 million you pay 12%.
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Do you pay Stamp Duty when you sell a house?

No, Stamp Duty is paid by the buyer – not the seller. Unlike some countries, there is no specific property tax on the sale of primary homes in the UK. However, some sellers have to pay Capital Gains Tax if they’re selling a buy-to-let or second home, or if they use some (or all) of a home for business purposes. 

Can you add Stamp Duty to a mortgage?

Technically, you can add Stamp Duty to a mortgage, though whether you’d want to is another matter (note – it's definitely worth speaking with a specialist on this, if you're considering it!). By adding Stamp Duty to your mortgage, you would pay interest on this for the duration of the mortgage term, so you’d be paying more overall.

How to pay Stamp Duty

Usually, home buyers pay Stamp Duty through their solicitors – often on the day of completion. First, your solicitors would work out what you owe, then collect the money from you. Next, they submit a Stamp Duty Return, pay the money to HMRC, and finally, add any charges to your bill. If you’re not using a solicitor for whatever reason, you can technically complete a Stamp Duty Return yourself and file this online.

When do you pay Stamp Duty?

When you buy a home, you’ll have to pay Stamp Duty to HMRC within 14 days of completion. Failure to do so risks getting a fine even bigger than when Eric Cantona did that kung fu kick. Actually, it’s an initial penalty of £100 – read more.

Stamp Duty is just one of the costs of moving, and if you’re looking to work out your buying potential, why not try our eligibility checker? If you’re mortgageable, we may be able to help top up your deposit to help you make your move.

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