Introduction to Stamp Duty | NatWest

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Introduction to Stamp Duty

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If you're buying a new home, you'll likely have heard of stamp duty.

This added expense can be overlooked when first budgeting for a move, so it's important you know exactly what it is and how much you'll be paying before you consider purchasing your dream pad.

What is stamp duty?

What is stamp duty?

Stamp duty dates back to the 17th century, when almost every form of legal documentation was taxed – from marriage certificates to cheques. To show that the tax was paid, each document received an official stamp, which explains how today's duty got its name.

 

While its purpose is still largely the same today, modern stamp duty land tax is only added onto property and land transactions over the value of £125,000, and only applies if you live in England, Wales or Northern Ireland. There is a similar Scottish counterpart too, but that's called Land and Buildings Transaction Tax (LBTT). It's essentially the same premise, but is only applied to purchases above £145,000.

 

Whether the property you're interested in is leasehold, freehold or shared ownership, it's likely that stamp duty will come up on your radar at some point. Even if you're buying the property outright without a mortgage, you're still liable for stamp duty, though if you've inherited the home, you'll pay inheritance tax instead.

How much is stamp duty?

Your conveyancer will include stamp duty in your completion statement before the sale finally goes through, and they're obliged to send the funds over to HMRC no later than 30 days after you get the keys. However, they'll naturally want to know you can afford the fee before completing, so will likely ask for the amount upfront.

 

The amount you have to pay will be based on the purchase price, and you won't pay any tax on the first £125,000 of the sale. So long as you're not purchasing a second home or a buy-to-let property, there will be no stamp duty at all on anything valued below that £125,000 figure.

 

How much stamp duty you have to pay is set into tiers as a guide. 

Purchase price of property Percentage to be paid
Up to £125,000 0% 
£125,001 - £250,000 2% 
£250,001 - £925,000 5%
£925,001 - £1,500,000 10% 
£1,500,001 and over 12% 

 

For Scotland, the tiers are set at slightly different thresholds

Purchase price of property Percentage to be paid
Up to £145,000 0% 
£145,001 - £250,000 2% 
£250,001 - £325,000 5% 
£325,001 - £750,000 10% 
£750,001 and over 12% 

 

For the exact amount, you can use a Stamp Duty Land Tax Calculator, like this one from HMRC.

This link is to a non-NatWest website. NatWest is not liable for the accuracy of the information provided on this website.

Stamp duty and LBTT on second homes

  • Anyone buying an additional property in England and Wales, including Buy to let, second homes and holiday homes, will have to pay an extra 3% in stamp duty – even if the purchase is under that handy £125,000 threshold.
  • Scotland is similar, as LBTT is an extra 3% for second homes, unless the property in question costs less than £40,000.

Find out more about Land and Building Transaction Tax

What else should I consider?

  • As with all big purchases, budgeting is key. It's better not to borrow more money in your mortgage agreement just to cover stamp duty, as this could affect your loan to value ratio. Be sure then that you can stump up the cash before you put in an offer.
  • It’s worth noting that you will have 30 days from the date of completion (when contracts are signed and you have the keys in hand) to pay stamp duty or transaction tax.
  • Usually your solicitor will calculate and collect stamp duty ahead of time, but it's legally the buyer’s responsibility to make sure it's paid on time and for the correct amount. If you don’t meet the deadline, you could face a fine and possibly interest on top, so make sure you’re organised!

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