Stamp Duty, or Stamp Duty Land Tax (SDLT) is a tax paid on properties worth over a certain value in the UK. More specifically, stamp duty is paid on residential properties or pieces of land in Northern Ireland and England. Scotland and Wales, meanwhile, have their own similar tax schemes. Read on to find out more about what stamp duty is and how much it costs depending on where you live in the UK.

What Is Stamp Duty and How Does It Work?

First things first: what exactly is stamp duty and how does it work? 

Stamp duty, formally known as Stamp Duty Land Tax (SDLT) was first created in 1694 during the war against France. Under the Act of Parliament and the reign of William and Mary, the country imposed tax on legal documents. Afterwards, stamp duty began to expand and tax was paid on many other domestic items throughout British history. 

Stamp duty today, however, is slightly different. It has, nevertheless, continued due to how successful it was, and is, for raising money towards the government. So, today people in the UK are required to pay a land tax when purchasing residential properties or land which are worth a certain amount. 

For instance, the current tax threshold today means properties bought for less than £250,000 do not come with payable tax. Stamp duty is a land tax applicable to properties and land purchased in the UK – and more specifically, England and Northern Ireland. 

map-uk

Stamp duty rates differ by country in the United Kingdom.

When completing a purchase of a property, buyers will be required to file a return to HMRC stating how much stamp duty they owe. They then have a set period of time in which they can pay HMRC – which this process is often done through solicitors, and done either online via HMRC’s form or by post. 

Even if the property or land you buy falls below the starting tax threshold, you will still be required to file a return to HMRC, who collect stamp duty on behalf of the government.

In addition, stamp duty in England and Northern Ireland have many exemptions and rules in place. For instance, first-time buyers are exempt from paying up to certain thresholds and those purchasing additional properties above a certain value will be required to pay a surcharge of 3%. 

 

Why Is Stamp Duty Different in Scotland and Wales? 

In contrast, Scotland and Wales have their own tax schemes and rules. In Scotland, stamp duty was changed in 2015 and called Land and Buildings Transaction Tax (LBTT). Meanwhile, since 2018 in Wales it is referred to as Land Transaction Tax (LTT). 

Generally, Scotland and Wales have higher tax thresholds – meaning homebuyers, in comparison to those in England and Northern Ireland, are only required to start paying stamp duty over a higher threshold. However, they do also have similar surcharges in place for homebuyers purchasing additional properties. 

 

How Much Is Stamp Duty in the UK? 

In England and Northern Ireland, the tax rates differ. The tax rates and thresholds also change over time, depending if the government initiates this. Currently, in England and Northern Ireland the threshold begin at £250,000. Meaning, if you buy a property worth less than this, you will not be required to pay stamp duty. 

In Scotland, however, the threshold starts at a higher value. Residential properties or land bought over £145,000 are payable in stamp duty. Wales, meanwhile, has a much higher threshold with residential properties’ threshold starting at £225,000. 

Following these amounts, each country then has their own thresholds and rates which apply. Therefore, stamp duty is one of the most expensive and additional costs for home-buyers. Not only will you need to set aside deposits, arrange a mortgage, pay for solicitors and surveyors but you will also need to keep in mind stamp duty. 

You can find out how much stamp duty you will pay on a property either through your solicitor, who will do the whole process on your behalf, or alternatively you can do it yourself and use an online stamp duty UK calculator. 

 

Who Pays Stamp Duty in the UK? 

Everyone is required to pay stamp duty in the UK if they buy a residential property or piece of land above the starting threshold. However, in England and Northern Ireland, as well as in Wales and Scotland, first-time buyers are all exempt from paying stamp duty up to certain values.

For example, in England and Northern Ireland first-time buyers are exempt from paying any stamp duty at all on properties worth up to £425,000. Following this value, they are then given discounted rates up to £625,000 and then normal tax rates apply.

In complete contrast, first-time buyers in Wales today are not required to pay any stamp duty on residential properties or pieces of land worth up to £425,000. Scotland, in contrast, only allows first-time buyers a tax exemption up to the value of £175,000. 

Across the UK, stamp duty exemptions and discount rates are in place to help first-time buyers get onto the property ladder – which would be extremely difficult without. There are also other exemptions in place and stamp duty reliefs, but these vary by country.