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What Is Stamp Duty and Why Do I Need To Pay It?

18 June 2019

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Stamp Duty Land Tax (SDLT), commonly referred to as Stamp Duty, is paid to the government, when you purchase land or property, valued over a certain amount in England.

Conveyancing specialists TRUE Solicitors answer all of your stamp duty related questions below:

What is the Stamp Duty threshold?

The amount of Stamp Duty you pay depends on the value of the property and its use – i.e. residential or commercial and whether you qualify as a first time buyer.

• Stamp Duty is applicable on residential properties valued over £125,000.
• For non-residential land and commercial property the SDLT threshold is £150,000 and above.

What are the different Stamp Duty rates?

Stamp Duty rates differ depending on the value of the property and if you are purchasing a second home or for the purposes of Buy to Let. The table below outlines the stamp duty rates set by the government:

Property Purchase Price Rate of Stamp Duty Buy to Let/Additional Home Rate
£0-£125,000 0% 0%
£125,001 – £250,000 2% 5%
£250,001 – £925,000 5% 8%
£925,001 – £1,500,000 10% 13%
£1,500,000 + 12% 15%

The amount of Stamp Duty that you will pay is calculated on the part of the property purchase price that falls within each band.

For example if you are selling your current home and purchasing your next property which costs £325,000 the SDLT you will pay is calculated as follows:

  • 0% up to £125,000 = £0
  • 2% on the next £125,000 = £2500
  • 5% on the final £75,000 = £3750
  • Total SDLT = £6250

If you are buying a second home or a Buy to Let property, for the same price of £325,000, the SDLT would be calculated as below:

  • 3% up to £125,000 = £3750
  • 5% on the next £125,000 = 6250
  • 8% on the final £75,000 = 6000
  • Total SDLT = £16,000

Do I get a discount on Stamp Duty if I am a First Time Buyer?

First-time buyers in England are exempt from paying stamp duty on properties worth up to £300,000. If you are a first-time buyer purchasing a home valued between £300,000-£500,000 you don’t pay any stamp duty on the first £300,000, but will pay stamp duty on the remaining amount up to £200,000.

For example for a property worth £425,000 the SDLT would be calculated as follows:

• 0% up to £300,000 = £0
• 5% on the next £125,000 = £6250
• Total SDLT = £6250

If you are buying a home valued at over £500,000 you will not benefit from a first time buyer discount.

Do I benefit from Stamp Duty relief if I am a first time buyer purchasing through a shared ownership scheme?

Home owners who purchase a home through a shared ownership scheme, purchased on or after 22 November 2017, can also benefit from stamp duty relief if their home is valued at £500,000 or under.

Can I benefit from Stamp Duty relief if I am a first time buyer purchasing a property with someone else?

If you are purchasing a property with your partner, you both need to be first time buyers i.e. have both never owned your own home before, to qualify for Stamp Duty relief.

When do I have to pay Stamp Duty?

You have 14 days to pay and file a SDLT return from the date in which you complete the purchase of your property. If you do not pay within this time period you may face a paying a penalty and added interest.

How do I pay Stamp Duty?

Your solicitor will typically file the Stamp Duty return on your behalf, the forms can be submitted online or by post. You must submit a SDLT to HMRC even if your new home is under £125,000.

Who is exempt from paying Stamp Duty?

There are instances in which you will be exempt from paying Stamp Duty, including:

• You are a first-time buyer purchasing a home valued at £300,000 and under.
• You are purchasing a home under the value of £125,000.
• If you are transferring a proportion of your home’s value to your ex-partner, following a divorce or separation you do not need to pay Stamp Duty if the transfer is pursuant to a court order.

If you are looking to buy, sell or remortgage your home contact TRUE Solicitors today. Our expert residential conveyancing team provide an efficient, proactive service. We offer fixed fee, stress fee conveyancing, with a no completion, no fee guarantee. You can also get a free estimate using our simple online fee calculator.

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