Published: 7 November 2017
Stamp duty land tax (normally called stamp duty, or SDLT) is an additional tax you have to pay when you buy a property above a set price threshold.
Here's how it works:
What is stamp duty?
Stamp duty is one of the costs and fees you need to consider when saving up for your home.
Stamp duty is a tax you pay when you buy a property for more than £125,000. Properties where the market value is less than £125,000 are currently exempt from stamp duty.
As long as the property costs more than £125,000, stamp duty applies regardless of the way you buy the property. So whether you're buying with cash or getting a mortgage, stamp duty still applies.
For first time buyers, you won't pay stamp duty on properties costing less than £300,000. And if you're buying a home costing £500,000, you don't pay stamp duty on the first £300,000. This change was announced by the government on 22nd November 2017.
You pay stamp duty on both freehold and leasehold properties.
Stamp duty doesn't apply in Scotland. Instead, you pay Land and Buildings Transaction Tax. Different rates and guidance apply, so make sure you get specific advice for Scotland if that's where you're buying.
How much do I have to pay for stamp duty?
There are different "bands" for paying stamp duty, depending on the cost of the property.
Stamp duty can be changed by the government at any time, so double-check that you've got up-to-date information when working out the full costs of buying a home.
| Property price | Stamp duty rate | Stamp duty rate for first time buyers |
|---|---|---|
| £0-£125,000 | 0% | 0% |
| £125,001-£250,000 | 2% | 0% |
| £250,000-£300,000 | 5% | 0% |
| £300,001-£925,000 | 5% | 5% |
| £925,001-£1.5m | 10% | 10% |
| £1.5m+ | 12% | 12% |
Stamp duty is only calculated on the part of the purchase price that falls within that band - not the whole thing.
So if you buy a property for £125,001, you'll only have to pay the tax on 2% of £1. This is because you're only £1 over the threshold for paying stamp duty.
Things get slightly more complicated as you work through the bands. For example, let's say you buy a house for £950,000. You will pay:
- 0% tax on the first £125,000.
- 2% tax on the next £125,000.
- 5% on the next £675,000.
- 10% on the next £25,000.
So that's:
- £2,500, plus
- £33,750, plus
- £2,500 - meaning a total stamp duty charge of £38,750.
Exemptions from stamp duty
Stamp duty isn't applied if the property is:
- A gift, or left to you in a Will
- Being transferred as part of a divorce or separation
(Other taxes might apply, too. It's worth speaking to a Financial Advisor about tax to find out exactly what you'll need to pay.)
If you buy a Shared Ownership home, you only have to pay stamp duty on the portion of the property you're buying. So if you buy 50% of a £200,000 house, you won't have to pay any stamp duty.
Paying your stamp duty
You have to pay stamp duty within 30 days of finalising the purchase of the property. To do this, you need to submit a Stamp Duty Land Tax return.
Usually your solicitor will take care of this, but it's worth double-checking that this is the case.
If it's not submitted within 30 days, HMRC may add interest to the payment and a late payment penalty.
This guide is intended as a summary only and does not constitute legal or financial advice from Leeds Building Society. No reliance should be placed on this guide. We recommend you seek independent financial and/or legal advice if you have any questions.
Your property could be repossessed if you don't keep up your mortgage repayments.
