Stamp Duty Land Tax when purchasing a property

What is stamp duty?

Stamp Duty Land Tax is a lump sum of money that is paid by anyone that is purchasing a property or land that is worth more than a set amount. The amount of tax you pay is worked out on a percentage rate which increases as the value of the property or land does, as well as on the type of property you are purchasing, Residential or commercial.

How much stamp duty do I pay?

It can be quite complicated to work the amount of Stamp Duty land tax you need to pay but in the majority of cases you pay a percentage of tax on the amount of the property that is over a specified value. The percentage rate increases as the value of the property does.

Property or lease premium or transfer value
SDLT rate
Up to £125,000 Zero
The next £125,000 (the portion from £125,001 to £250,000) 2%
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%

For example if you were to purchase a property for £300,000 you would calculate you stamp duty land tax as follows;

0% on the first £125,000 = £0

2% on the next £125,000 (the amount that sits in the £125,001 to £250,000 bracket) = £2,500

5% on the final £50,000 (the amount left over that sits in the £250,001 to £925,000 bracket) = £2,500

Resulting in Stamp duty land tax of £5000

However there is sometimes an additional 3% on the top of the above SDLT rates if you a purchasing a second residential property or on any purchase of a property which results in you owning more than one.

Exemptions to stamp duty

As a first time buyer you can claim ‘relief’ which means you don’t have to pay stamp duty on the first £300,000, therefore if the property is being brought for less than £300,000 there is no stamp duty to pay. However if the property is being purchased for between £300,001 and £500,000 Stamp Duty Land Tax is charged at 5%. For a property that is priced at £500,000 or more the normal SDLT rules apply.

If you are purchasing a property as joint owners, both owners must be first time buyers into to claim this relief.

When do I pay stamp duty?

Stamp Duty must be paid within 30 days of completion, if you fail to pay the stamp duty land tax on time HMRC may charge you interest or penalties.

SDLT must also be paid upfront in a lump sum it cannot be paid in installments.

Who do I pay it to?

Stamp Duty should be paid directly to HMRC by submitting a SDLT returns.

When using a conveyancing solicitor it will be them that submits the SLDT returns, they can do this using the electronic method which is faster, more secure and results in less errors. Your solicitor should ensure that the correct amount of stamp duty is paid to HMRC within the time frame.

You can do this yourself following the guidance provided on the Government website but if you are submitting the SDLT returns yourself, you must use the paper return.