Stamp Duty Tax Explained

What is Stamp Duty Tax in UK

Buying a House in the UK? Here is your guide to Stamp Duty Tax, when and how much to pay on your new home.

1. What is Stamp Duty Tax?

Stamp Duty Land Tax, or SDLT, is a tax imposed when you purchase a property in the UK. The specific amount you pay is determined by the property’s price. In simpler terms, the cost of this tax varies based on how much the property is worth.

2. Properties Subject to Stamp Duty Tax:

Stamp duty is a mandatory tax that you must pay in several property-related scenarios. Here’s a breakdown:

Freehold Property Purchase:

When you buy a property with full ownership rights, known as a freehold property.

Leasehold Property Purchase:

Whether you’re acquiring a brand-new leasehold property or an existing one, stamp duty is applicable. A leasehold property means you have the right to live in the property for a set number of years but don’t own the land it stands on.

Shared Ownership Scheme:

If you’re participating in a shared ownership scheme, where you co-own a property with a housing association, you still need to pay stamp duty.

Land or Property Transfer:

Stamp duty is also applicable when there is a transfer of land or property, and money is involved in the exchange. This could be when taking on a mortgage or buying a share in a house.

3. When To Pay Stamp Duty Tax?

You need to pay stamp duty within 14 days after officially owning your property, which happens when the legal ownership is transferred to you. Typically, your solicitor or conveyancer takes care of this for you. They submit the Land Transaction Return to HM Revenue & Customs on the completion day and transfer the money on your behalf.

4. How Much We Pay Stamp Duty Tax in UK?

Stamp Duty in the UK can vary based on factors such as the property value, whether it’s residential or commercial, and whether you are a first-time buyer. Overseas buyer pay some extra charges. We will explained all of them below:

First-time Buyers Stamp Duty Rates:

When you’re a first-time buyer and the property is less than £425,000, you don’t pay any stamp duty. If it’s between £425,000 and £625,000, you pay 5% on the amount over £425,000. But if the property costs more than £625,000, you follow the regular stamp duty rates like everyone else.

Stamp Duty Rates For Second Home or Buy-To-Let Property:

No tax is applied on the first £250,000 when you’re moving home. If the home costs between £250,000 and £925,000, you pay 5% on the amount exceeding £250,000. For homes priced between £925,000 and £1.5 million, you pay 10% on the amount over £925,000. Homes over £1.5 million incur a 12% tax on the portion exceeding £1.5 million.

Stamp Duty Rates For Overseas Buyers:

Overseas buyers pay the regular stamp duty along with an additional 2% surcharge.

The extra 2% surcharge is for anyone who isn’t a UK resident, and this includes British expats living abroad. If you haven’t been in the UK for at least 183 days in the 12 months before buying a property, you’re considered a non-UK resident. So, if you fall into this category, you’ll need to pay the regular stamp duty plus the additional 2% surcharge when purchasing a property in the UK.

5. What Properties are Exempt from Stamp Duty Tax?

First-time buyers are exempt from paying stamp duty on the initial £425,000 for homes priced up to £625,000. Yet, if a first-time buyer is acquiring a property exceeding £625,000, they will be subject to the standard stamp duty rates, similar to other buyers.

Also you won’t pay stamp duty if:

  • You get a property as part of a divorce settlement.
  • A property is passed to you through a will.
  • You receive a property as a gift (the property must be free of mortgages)

6. Full Calculation Breakdown:

UK Resident SDLT Rate:

Tax BandFirst Time BuyerAdditional Property
Less than £250k0%0% + 3%*
£250k to £925k5%5% + 3%*
£925k to £1.5m10%10% + 3%*
Rest over £1.5m12%12% + 3%*
* If you buy an additional property for less than £40,000, there’s no tax. Anything more then £40,000, you’ll pay a 3% tax on the entire purchase price.

Non-UK Resident SDLT Rate:

Tax BandFirst Time BuyerAdditional Property
Less than £250k0% + 2%0% + 5%*
£250k to £925k5% + 2%5% + 5%*
£925k to £1.5m10% + 2%10% + 5%*
Rest over £1.5m12% +2%12% + 5%*
* Overseas first time buyer pay normal fee + 2% surcharge. Overseas clients who buy additional property pay normal fee + 5% surcharge

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