Stamp Duty: What you Need to Know

Stamp duty is a tax you pay when buying property in England and Northern Ireland. How much stamp duty you pay will vary depending on whether you’re a first-time buyer and the value of the property.

Rhiannon Philps, Brean Horne Published on 30 July 2020. Last updated on 25 October 2021.
Stamp Duty: What you Need to Know

Stamp duty is a type of tax paid when purchasing a property. The amount of stamp duty you will pay varies, depending on whether you’re a first-time buyer as well as on the value of the property.

A temporary stamp duty cut was introduced on 8 July 2020 to try to increase buyer confidence after the first lockdown. Chancellor Rishi Sunak then announced in the March Budget 2021 that the stamp duty holiday would be extended until 30 September 2021.

Now that the stamp duty relief has ended, rates have returned to their original amount. Read on to find out what you’ll need to pay.

What is Stamp Duty?

Stamp Duty Land Tax (SDLT), or stamp duty for short, is a tax you pay when buying a residential home or piece of land in England and Northern Ireland.

SDLT also needs to be paid on non-residential property and land, but at different rates.

It applies to both freehold and leasehold properties that you may purchase outright or with a mortgage.

Scotland and Wales have their own versions of property tax, which are similar to stamp duty.

» MORE: Cost of buying a house: what you need to know

Who pays stamp duty?

Stamp duty is always paid by the person buying the property. You’ll have 14 days after the completion of the property sale to file a return to HM Revenue and Customs (HMRC) and pay any stamp duty due.

Typically, your solicitor, conveyancer or agent will file a return to HMRC and pay any stamp duty on the day of completion on your behalf. They will also claim any tax relief that you might be eligible for.

You’ll have to file the stamp duty return, online or in the post, and pay the tax yourself if they don’t do this for you.

It’s important to make sure any stamp duty is paid on time, otherwise you may be charged penalties and interest.

You don’t have to send off a return if you’re exempt from paying stamp duty.

How much is stamp duty?

The amount of stamp duty you pay varies depending on the value of the property you want to buy and whether you are a first-time buyer. There are different thresholds of tax based on how much a property costs.

The location of the property you want to buy also affects how much stamp duty you pay. Scotland and Wales each have their own versions of stamp duty with different rates.

Whether you’re a first-time buyer or purchasing an additional home will also affect how much stamp duty you pay.

This is because first-time buyers may qualify for a stamp duty discount, while you may have to pay higher rates of stamp duty if you’re buying a home in addition to the one you already have.

» COMPARE: First-time buyer mortgage deals

Stamp duty in England and Northern Ireland

The table below shows stamp duty rates for buyers in England and Northern Ireland from 1 October 2021.

Property purchase price

Stamp duty rate

Up to £125,000

0%

£125,001 to £250,000   

2%

£250,001 to £925,000

5%

£925,001 to £1.5 million

10%

Over £1.5 million

12%

Source: Gov.uk

Stamp duty is calculated in a similar way to income tax and uses a ‘tiered structure.’

This means the same level of tax isn’t applied to the total property price. Instead, you’ll pay tax on each portion of the property price that falls into the different stamp duty tax bands.

According to gov.uk, if you bought a house for £295,000:

You would need to pay stamp duty of:

  • 0% on the first £125,000 = £0
  • 2% on the next £125,000 = £2,500
  • 5% on the final £45,000 = £2,250
  • Total: £4,750.

Do you pay stamp duty on a second home?

You’ll usually have to pay 3% on top of the standard stamp duty tax rates if you buy an additional property to your main residence.

If you’re simply moving home and the new property replaces your current main residence, you won’t have to pay the additional 3% stamp duty surcharge. If you purchase your new property before selling your current one then you will be required to pay stamp duty at additional rates. You can then claim a refund if you sell your previous home within 36 months.

Stamp duty relief for first-time buyers

First-time buyers in England and Northern Ireland may be eligible for a stamp duty relief.

You won’t have to pay stamp duty on properties up to £300,000. And will pay 5% on the portion of the property costing £300,001 to £500,000.

There is no stamp duty relief for homes priced over £500,000.

» MORE: Learn how first-time buyer stamp duty relief works

Stamp duty exemptions

Some buyers may be exempt from stamp duty, which means they don’t have to pay. You may be exempt from stamp duty if:

  • the property is worth less than £40,000
  • property is left to you in a will
  • property is transferred to you in a divorce or dissolution of a civil partnership
  • you use alternative financial property agreements

You can find the full list of stamp duty exemptions on Gov.UK.

Claiming back stamp duty

You can apply for a stamp duty refund if you think you have overpaid.

HMRC usually issues the refund first and checks whether the claim is accurate afterwards. It can take HMRC up to nine months to check your refund is accurate and make changes.

If HMRC finds that you claimed the wrong amount or weren’t entitled to a stamp duty refund, you will have to repay the money, plus interest. You may also have to pay a penalty.

For this reason, you may not want to use the money until you have confirmation that your refund is correct.

» MORE: Tips for getting a mortgage as a first-time buyer

What was the stamp duty holiday?

The stamp duty holiday was introduced on 8 July 2020 to boost confidence in the UK property market after the first lockdown due to Covid-19.

It introduced reduced stamp duty rates, which meant that buyers didn’t have to pay tax on properties worth up to £500,000. The threshold increase meant that buyers could save up to £15,000 when purchasing homes costing over £500,000.

Although it was originally due to end on 30 June 2021, the government extended the stamp duty holiday to the end of September 2021 at a reduced rate.

From 1 July 2021 until 30 September buyers purchasing a property worth £250,000 or less didn’t have to pay stamp duty.

» COMPARE: The latest mortgage deals

Will the stamp duty holiday be extended?

The stamp duty holiday offered ended on 30 September 2021 and there currently aren’t any plans to extend it further.

Stamp duty relief is still available for first-time home buyers. You could also get a stamp duty discount for:

  • multiple dwellings
  • right to buy properties
  • registered social landlords
  • charities buying for charitable purposes

You can find a full list of stamp duty reliefs on Gov.uk.

Stamp Duty in Scotland

In Scotland, you may need to pay Land and Buildings Transaction Tax (LBTT) instead of stamp duty when you buy a home.

The table below shows LBTT rates for buyers in Scotland from 1 April 2021.

Property purchase price

LBTT rate

Up to £145,000

0%

£155,001 to £250,000   

2%

£250,001 to £325,000

5%

£325,001 to £750,000

10%

Over £750,000

12%

Source: Gov.Scot

If you buy an additional property worth over £40,000, you’ll also have to pay the Additional Dwelling Supplement (ADS). ADS is charged at 4% of the total purchase price of the property.

The LBTT threshold for first-time buyers in Scotland is increased to £175,000.

» MORE: Everything you need to know about buying a house

Stamp Duty in Wales

If you buy a property in Wales, you may need to pay Land Transaction Tax (LTT).

The table below shows LTT rates for buyers in Wales from 1 July 2021.

Property purchase price

LTT rate

Up to £180,000

0%

£180,001 - £250,000

3.5%

£250,001 - £400,000

5%

£400,000 - £750,000

7.5%

£750,000 - £1.5 million

10%

Over 1.5 million

12%

Information from Gov.Wales

There is no tax relief for first-time buyers in Wales and you may have to pay higher LTT rates if you buy an additional home.

» MORE: Mortgage tips for first-time buyers

Image source: Getty Images

About the authors:

Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more

Brean is a personal finance writer at NerdWallet. She covers a range of financial topics and has written for consumer titles including Which?, Moneywise and The Motley Fool. Read more

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