When purchasing a home, one of most people's first costs is stamp duty tax. Whether you're a home mover, a first-time home buyer, or purchasing a second property, this guide will take you through everything you need to know about how much stamp duty costs and when you need to pay.
What Is Stamp Duty?
Stamp duty is a tax imposed on the purchase of property, vehicles, and shares. For example, the stamp duty you pay is determined and calculated differently from the stamp duty on shares.
Before making a purchase, you will need to factor in the stamp duty that you'll need to pay. The higher the stamp duty, the more expensive the property will be. There's also a stamp duty surcharge of three per cent levied on foreign purchasers.
How much stamp duty you pay depends on what you're buying and how much you pay for it. Property that is worth less than £40,000 is exempt from stamp duty. However, the tax applies if you do not already have another property.
Who Pays Stamp Duty?
The home buyer always pays stamp duty, not the seller. Usually, your solicitor will pay it on your behalf as part of the purchase process.
In England and Northern Ireland, from 1st October 2021, no stamp duty will be paid on the first £125,000 of the property's value. First-time buyers pay no stamp duty on the first £300,000 of the property's value.
If you buy an additional property, you pay three per cent at the lowest band and higher rates above this value. If you are a non-UK resident, you will also pay a two per cent surcharge from 1st April 2021.
How Much Is Stamp Duty?
Let's look at how much stamp duty costs in the UK and how to calculate the amount you'll need to pay when buying a property.
-
England
Stamp duty in England is calculated on a sliding scale. Three stamp duty rates depend on the property's value, which are:
-
two per cent on the first £125,000
-
five per cent on the value up to £250,000
-
ten per cent on the value over £250,000
For example, if you were to buy a property for £150,000, you would pay stamp duty on the amount between £125,000 and £50,000, which is £25,000. This means that you would pay two per cent on the first £125,000 and five per cent on the amount between £125,000 and £50,000, which is £12,500. Therefore, you would pay £12,500 plus two per cent of £25,000 for a total of £6,250 in stamp duty.
-
Scotland
Stamp duty in Scotland, like England, is calculated on a sliding scale. Three stamp duty rates depend on the property's value, which are:
-
one per cent on the first £135,000
-
three per cent on the value up to £250,000
-
four and a half per cent on the value over £250,000
For example, if you were to buy a property for £150,000, you would pay stamp duty on the amount between £135,000 and £50,000, which is £10,000. This means that you would pay one per cent on the first £135,000 and five per cent on the amount between £135,000 and £50,000, which is £5,000. Therefore, you would pay £5,000 plus one per cent of £50,000 for a total of £6,000 in stamp duty.
-
Northern Ireland
Stamp duty in Northern Ireland is calculated on a sliding scale. Three stamp duty rates depend on the property's value, which are:
-
zero per cent on the first £125,000
-
two per cent on the value up to £150,000
-
four per cent on the value over £150,000
For example, if you were to buy a property for £150,000, you would pay stamp duty on the amount between £125,000 and £50,000, which is £25,000. This means that you would pay zero per cent on the first £125,000 and two per cent on the amount between £125,000 and £50,000, which is £10,000. Therefore, you would pay £10,000 plus two per cent of £25,000 for a total of £3,000 in stamp duty.
Northern Ireland, however, does have a stamp duty surcharge of two per cent. This means that if you are a non-UK resident and you buy a property in Northern Ireland, you'll also pay an additional two per cent surcharge on the total property value. For example, if you were to buy a property for £150,000, you would pay stamp duty on the amount between £125,000 and £50,000, which is £25,000. This means that you would pay zero per cent on the first £125,000 and two per cent on the amount between £125,000 and £50,000, which is £10,000. Therefore, you would pay £10,000 plus two per cent of £25,000 for a total of £3,000 in stamp duty.
Stamp Duty Surcharge on Additional Properties
The government imposes a stamp duty surcharge of three per cent on any additional properties purchased in the UK. This is in addition to the standard stamp duty rates. For example, if you were to buy a second property for £300,000, you would pay stamp duty on the amount between £250,000 and £350,000, which is £50,000. This means that you would pay five per cent on the first £250,000 and ten per cent on the amount between £250,000 and £350,000, which is £25,000. Therefore, you would pay £25,000 plus three per cent of £50,000 for a total of £25,500 in stamp duty.
Do You Need to Pay Stamp Duty?
As mentioned, everyone needs to pay stamp duty apart from those buying a property for £125,000 or less in the UK. Your solicitor pays stamp duty to the government to purchase a property. Even if you are buying a property for less than £125,000, it is recommended that you pay stamp duty, as the following may happen:
-
If your solicitor fails to pay stamp duty, you still have to pay the amount when you sell the property.
-
If you sell the property and don't pay the stamp duty, you will have to pay the outstanding amount plus a fine.
-
If your solicitor doesn't pay the stamp duty, they will be responsible for paying the outstanding amount.
Conclusion
Stamp duty is a tax charged on the purchase of property, vehicles, and shares. It is determined by state and federal governments, where stamp duty on property is calculated differently from stamp duty on shares, for example.
The stamp duty you're charged is determined by the purchase price of the property and the state you're purchasing in. The state government will bill you after you've made your purchase. It's best to ask your realtor or lawyer for more information about how stamp duty operates.
At Conveyancing Calculator, we provide instant online residential conveyancing quotations using our trusted and accurate Conveyancing Fees Calculator in the UK. If you are moving home, buying a house, selling a house or remortgaging a property, then simply use our conveyancing quote calculator. We will provide you with instant prices direct from the UK-regulated SRA property solicitor or CLC licensed conveyancer. If you need a property purchase solicitor in the UK, we’ve got you covered. Get in touch with us today and let us know how we can help.
Trackback URL
The Trackback Address for What Is Stamp Duty and Who Should Pay for It? is:
