Stamp Duty Land Tax (SDLT) is a paid to HMRC by those purchasing property. It’s calculated by the price you paid for the property, as well as any special considerations about you as a buyer.
This guide is for property purchases in England only, there are slightly different rules and bandings in Wales, Scotland and Northern Ireland, which you can find here for Scotland, Wales and Northern Ireland.
How much will I have to pay?
…a question that appears in almost every part of the house buying process. Rates differ between the purchase of homes, and commercial and industrial plots.
1. A few quick notes for you to scribble down:
• Stamp Duty is normally paid, in practice, by your solicitor acting as the conveyancer in the transaction, whether or not any Stamp Duty is actually due. It’s a legal requirement that HMRC is notified via a return that the transaction has taken place.
• Stamp Duty must be paid within 14 days of completion. This used to be 30 days but was reduced to 14 days on 1 March 2019 (the very last of the many stages of buying a house).
• Rates are split across 5 bandings going upwards from £0.
2. Our Stamp Duty Calculator!
First of all, let’s look at those rates:
*Bandings correct at 21/05/2019
Exemptions, considerations and altered rates.
In many circumstances, the above rates are lower or higher depending on personal circumstances. Here are a few highlights:
1. First-time buyers
First time buyers pay zero SDLT on the first £300,000 of the purchase price of their property, in an effort to make buying your first home more affordable.
¬ To qualify as a first-time buyer, you cannot have ever owned any residential property, but you can own, or have owned, commercial property.
There are a number of situations where you don’t have to pay any SDLT:
1. Property that has been left to you in a will.
2. Transference of property in accordance with a divorce agreement.
3. Property given as a gift.
4. Property is a holiday lodge.
5. Property that is moveable, so therefore does not come with a land-parcel.
6. House-boats, unless they come with a land-parcel (such as a garden or private mooring).
3. Buy to let properties
Buy-to-let landlords face an increase of 3% SDLT across all Stamp Duty bands. This includes buy-to-let career landlords, those buying second homes, and those buying holiday homes.
Stamp duty in practice
¬ Jennifer is selling her house to buy a new property for £445,000 that she plans to live in.
o Jennifer isn’t a first-time buyer so she won’t enjoy any stamp duty discounts. With a property purchase price of £445,000, she will pay:
0% on the first £125,000, plus
2% on 125,001 – £250,000 (£2,500), plus
5% on £250,001 – £445,000 (9,750)
Therefore, cumulatively, Jennifer pays stamp duty of £12,250.
¬ Adam is currently living with his parents and is buying a property that costs £215,000 which will be his first home.
o Adam pays no stamp duty at all as it is his first home and the value of his property is below £300,000.
¬ Natasha currently lives in her own home and is investing in a property to rent out. The purchase price is £150,000.
o Because she is buying a property to rent out, Natasha will pay an additional 3% across all relevant bands. With a purchase price of £150,000, she will pay:
3% on the first £125,000 (3,750), plus
5% on £125,001 – £150,000 (£1,250)
Therefore, cumulatively, Natasha will pay £5,000 in stamp duty.
Hopefully now you know everything you need to know about Stamp Duty Land Tax when buying a new home. But, before you put your offer in, make sure you get the property checked out by one of our Chartered Surveyors and get your RICS HomeBuyer Report!