Stamp duty has been around for centuries, and has since evolved into a new form of land tax called Stamp Duty Land Tax (SDLT). Stamp duty is payable on residential properties in the UK, and how much tax you pay depends on a variety of factors. Read our guide which explains everything you need to know about stamp duty, and most importantly, why you have to pay it. 

 

What Is Stamp Duty and Why Do We Need to Pay It? 

Stamp duty, or otherwise formally known as Stamp Duty Land Tax, is a tax that homebuyers must pay when completing a purchase in the UK. Stamp duty is payable on residential properties in Northern Ireland and England. Meanwhile, Scotland and Wales have their own similar tax schemes for residential properties.

How much you pay in stamp duty depends on a variety of factors, such as when the property was bought, where, and how much it cost. Generally, residential properties bought for over £250,000 and rates vary depending on which bracket the value of the house falls within to. 

Stamp duty is a land transaction tax, and was first properly introduced in 1694 to raise money towards the war against France. It was a tax applicable to legal documents, and then was made payable on other domestic items as time progressed. It was introduced during the reign of William and Mary, and was done so through an Act of Parliament and was only a temporary measure during the war. 

Since, stamp duty has remained a part of tax due to its success in raising money for the government. Stamp duty, nonetheless, has evolved and witnessed many changes as the years have gone by – with rates varying, rules changing and many loopholes even applying… 

 

How Much Does Stamp Duty Cost?

Everyone who purchases a residential property in England or Northern Ireland must pay for stamp duty. Those purchasing properties in Wales and Scotland also pay stamp duty, however the tax rates and rules are different. 

There are, nevertheless, exemptions which apply. For example, first-time buyers are exempt from paying any stamp duty on properties worth up to £425,000. After this value, they will then pay a discounted rate on a property’s worth up to £625,000. Following this threshold, normal tax rates apply.

Similarly, those purchasing second homes will have to pay an additional 3% surcharge on any stamp duty payable. However, if they sell their first home within 3 years of purchasing the second then the surcharge will be refunded by what is called a ‘stamp duty refund/rebate’. 

How much you pay in stamp duty depends on what type of property bought, where, and how much it was originally bought for. Generally, the stamp duty tax rates are between 0-12% and also depends on which threshold your property falls within. More expensive homes will, evidently, pay higher in tax. 

The current tax rates are as follows:

  • Up to £250,000 = 0% 
  • £250,001 – £925,000 = 5% 
  • £925,001 – £1,500,000 = 10% 
  • £1,500,001+ = 12%

To find out how much stamp duty you must pay, you can easily find out online using a stamp duty calculator or through your current solicitor. 

 

When Do You Have to Pay Stamp Duty?

When someone buys a residential property or piece of land in the UK, stamp duty must be paid within 30 days of completion of purchase. Even if you buy land or a property which is below any threshold, you will still have to let HMRC know. 

Stamp duty cannot be avoided, and paying late or avoiding to do so can lead to legal problems and late penalty fees. 

 

Who Pays Stamp Duty? 

Those that buy land or residential properties above a certain threshold must pay stamp duty in England and Northern Ireland. Properties worth over £250,000 are required to pay stamp duty, and how much one pays depends on the value of their property. 

However, there are some exemptions which may apply. First-time buyers, for example, are not required to pay any stamp duty up to a certain amount. Discounts also apply after certain thresholds to help first-time buyers get on the property ladder. 

 

How Do I Pay Stamp Duty?

Many homebuyers pay for stamp duty through their solicitor, with solicitors collecting the money you must pay on your behalf, in advance, and will complete the stamp duty process for you. 

However, paying stamp duty by yourself is straightforward. Some homebuyers, therefore, apply either online or by post and file their stamp duty returns directly to HMRC. This process can be done either online through HMRC’s portal, where you will fill out an online application form, or alternatively done via post by the same form but printed out.

Failing to pay stamp duty, or filing a return even if you are exempt from paying stamp duty, will likely lead to financial and legal complications. Late penalty fees also apply if you file a return too late.