A guide to the tax that’s charged on property purchases.
When you buy a property there are lots of costs to factor into your budget. One of the biggest could be the amount of stamp duty you’ll have to pay.
Here’s everything you need to know about what stamp duty is and how it works.
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What is stamp duty?
Taxes are as old as time and stamp duty is no exception. Introduced back in 1694, it’s a tax that’s charged on property purchases. Over the centuries stamp duty has had many facelifts, but the concept remains the same: when you buy a property, you may have to pay tax.
In England and Northern Ireland, it’s known as stamp duty land tax (SDLT). In Wales it’s called Land Transaction Tax (LTT) and Scotland has Land and Buildings Transaction Tax (LBTT).
How does stamp duty work?
In most cases, your solicitor will handle all aspects of stamp duty for you.
They’ll calculate how much you need to pay and collect the payment from you before you complete on the purchase. They’ll also send the payment to HMRC, Revenue Scotland or Welsh Revenue Authority on your behalf.
How much does stamp duty cost and how is it calculated?
No matter where you are in the UK, the amount you pay is dependent on the purchase price of the property.
This type of tax is charged as a tiered system based on pricing band levels. The portion of the sale price that falls into each band is then charged at the corresponding interest rate. The less you pay for a property, the less you’ll pay in stamp duty, LTT or LBTT.
Here are the current rates and bands (you may qualify for some savings on the amounts shown if you’re a first time buyer)*:
England and Northern Ireland
| Property value | Stamp duty rate |
| Up to £250,000 | 0% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
Examples of what you’d pay in England
If you buy a property for £225,000 or less
- you won’t pay any stamp duty
If you buy a property for £300,000, you’ll pay:
- £0 on the first £250,000
- 5% on the remaining £50,000 of the purchase price which is £2,500
Total stamp duty amount – £2,500
If you buy a property for £950,000, you’ll pay:
- £0 on the first £250,000
- 5% on the next £675,000 which is £33,750
- 10% on the remaining £25,000 which is £2,500
Total stamp duty amount: £36,250
Wales
| Price threshold | LTT rate |
| The portion up to and including £225,000 | 0% |
| The portion over £225,000 up to and including £400,000 | 6% |
| The portion over £400,000 up to and including £750,000 | 7.5% |
| The portion over £750,000 up to and including £1,500,000 | 10% |
| The portion over £1,500,000 | 12% |
Examples of what you’d pay in Wales
If you buy a property for £225,000 or less
- you won’t pay any Land Transaction Tax
If you buy a property for £300,000, you’ll pay:
- £0 for the first £225,000
- 6% on the remaining £75,000 of the purchase price which is £4,500
Total LTT amount – £4,500
If you buy a property for £950,000, you’ll pay:
- £0 on the first £225,000
- 6% on the next £175,000 which is £10,500
- 7.5% on the next £350,000 which is £26,250
- 10% on the remaining £200,000 which is £20,000
Total LTT amount: £56,750
Scotland
| Purchase price | LBTT rate |
| Up to £145,000 | 0% |
| £145,001 to £250,000 | 2% |
| £250,001 to £325,000 | 5% |
| £325,001 to £750,000 | 10% |
| Over £750,000 | 12% |
Examples of what you’d pay in Scotland
If you buy a property for 145,000 or less
- you won’t pay any Land and Buildings Transaction Tax.
If you buy a property for £300,000, you’ll pay:
- £0 for the first £145,000
- 2% on the next £105,000 which is £2,100
- 5% on the remaining £50,000 of the purchase price which is £2,500
Total LBTT amount – £4,600
If you buy a property for £950,000, you’ll pay:
- £0 on the first £145,000
- 2% on the next £105,000 which is £2,100
- 5% on the next £75,000 which is £3,750
- 10% on the next £425,000 which is £42,500
- 12% for the remaining £200,000 which is £24,000
Total LBTT amount: £72,350
*Rates correct as at April 2024
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Could stamp duty change?
In a move that’s clearly designed to sway voters, Jeremy Hunt is reportedly considering a change to stamp duty rates which could be announced in the 2024 Autumn statement.
If it goes ahead, it’ll be great news for many people as the threshold before paying stamp duty would increase from £250,000 to £300,000. This means nearly half of all property purchasers wouldn’t have to pay any stamp duty.
We’ll wait and see how this pans out, if it does happen, we’ll update this article explaining those changes.
Is there a way to reduce the amount of stamp duty you pay?
The simplest way to reduce the amount is to buy a property in a lower band. But this is of course easier said than done if you need a larger property or live in an area with higher prices.
If the property you’re interested in has an asking price that’s very close to a lower band limit, you could try negotiating with the seller to see if you can strike a deal. Just tread carefully with this approach though as there’s often a lot of competition among buyers, so you’ll need to make sure your offer is still competitive.
Stamp duty for first time buyers
The good news is that if you’re a first-time buyer in England or Northern Ireland, you’ll be able to save on the amount you pay – if the property will be your main residence and the purchase price is no more than £625,000.
As a first-time buyer, you’ll pay no stamp duty at all for properties with a purchase price of up to £425,000. If you buy a property for somewhere between £425,001 and £625,000, you’ll pay 5% of the purchase price in stamp duty.
Unfortunately, there’s no cut for first-time buyers in Wales. But with property prices generally lower than other parts of the UK, many first-time buyers will fall into the exemption band of £225,000 or less.
In Scotland as a first-time buyer, you won’t pay LBTT on the first £175,000, an up-lift on the usual £145,000 band limit.
Is anyone exempt from paying stamp duty?
There are some scenarios where you’ll be exempt from paying stamp duty. They are:
- A property transfer where no money or other type of payment changes hands
- A property left to you in a will
- A property transferred because of divorce or dissolution of a civil partnership
How does stamp duty differ for buying a second home or buy-to-let property?
If you’re buying a second home or a buy-to-let property in England or Northern Ireland, you’ll usually have to pay at least 3% extra on top of the usual stamp duty rates.
In Scotland, the extra amount you’ll pay for a second property is at least 6% of the purchase price and in Wales, it will be at least 4% extra.
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You’ll still have to pay stamp duty when you’re buying a shared ownership property. But this has a little more flexibility as you can choose whether to make a one-off payment based on the market value of the property or pay it in stages.
How long do you have to pay stamp duty after buying a property?
When it comes to making the payment, the rules are the same wherever you are in the UK. You have a 14-day deadline from the completion date to make your payment. Most solicitors will collect the payment from you in advance so they can make sure everything is paid on time.
As with anything tax and Government related, the rules on limits, rates and exemptions are always subject to change. Before you go ahead and put an offer in on a property, it’s always best to speak to a solicitor about your situation so they can help you understand the land tax implications and how much you’re likely to pay. The official Government websites for your part of the UK will also have the most up-to-date information.
It’s hardly worth haggling if the purchase price is close to a lower band limit because you only save the marginal rate on the excess over that limit, which is likely to be only a few hundred quid.
How much do you pay over £625000 as a first time buyer?