Introduction to Stamp Duty

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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?

The majority of people will need to pay Stamp Duty Land Tax (SDLT) if you’re buying a house over £125,000 in England, Wales and Northern Ireland. If you’re in Scotland it’s known as Land and Building Transaction Tax, and this applies to purchases over £145,000.

Changes to the system after the Budget announcement in November 2017, mean that there are now different rules if you’re buying your first home. So, first-time buyers will now be exempt from stamp duty on the first £300,000 of homes worth up to £500,000 (and only 5% on any proportion between £300k and £500k) – in England, Wales or Northern Ireland.

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?

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.

What if I'm a first-time buyer?

Who counts as a first-time buyer?

A first-time buyer is someone who's never owned a property, whether bought or inherited, anywhere in the world. You also won't count as a first-time buyer if you're buying your first property with the intention to let it out.

How much will it be for me?

In England, Wales and Northern Ireland (there's no change for buyers in Scotland), the new stamp duty rates for first-time buyers buying properties costing up to £500,000 are as follows:

Purchase price of property	Percentage to be paid
Up to £300,000	0%
£300,000.01-£500,000	5%

If you are buying a property worth more than £500,000 – you won’t benefit from the change, and you’ll be buying under the standard thresholds. Take a look at the table in ‘How much is stamp duty?’ for these.

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.

How do I pay Stamp Duty?

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. You should be able to see the amount on your completion statement before the sale finally goes through.

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. They’ll also claim any relief you’re eligible for, such as if you’re a first-time buyer. If you don’t meet the deadline, you could face a fine and possibly interest on top, so make sure you’re organised!