Stamp Duty Land Tax (SDLT or stamp duty) applies when purchasing a house, a flat, and other land and buildings in the UK when they exceed a certain price threshold. To get a better understanding of stamp duty and what it entails, read on.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Who is responsible for paying stamp duty?
The threshold for paying SDLT on residential properties begins at £250,000 unless you’re a first-time buyer and qualify for relief. First-time buyers are exempt from paying stamp duty on homes up to £425,000, and can enjoy a reduced rate on any home up to £625,000 — both freehold and leasehold properties and whether you’re planning to buy outright or finance with a mortgage. For any other property purchases, you will be responsible for paying stamp duty land tax.
How to calculate stamp duty
With pretty much everyone purchasing a home being responsible for paying SDLT, the most logical next step is to figure out exactly how much you’ll owe. Luckily, stamp duty operates on a sliding scale with various rate bands. What you’ll owe is based on the portion of the property price that falls within each rate band.
If you’re a first-time buyer, you’re exempt from paying on properties valued up to £425,000.
For everyone else, with homes more than £250,000 but less than £925,000, you’ll pay 5%; on homes from £925,000 to £1,500,000 you’ll pay 10%; and anything over £1.5 million is subject to 12%.
SDLT rules for second homes
If you are purchasing an additional property for £40,000 or more, then your purchase is subject to an extra 3% in stamp duty on top of the standard rate. The exceptions to this rule are caravan, mobile homes, and houseboats.
Property price caps
It’s important to understand how paying within the rate bands works. For example, as a first-time buyer you’re exempt from paying any stamp duty on a property valued up to £425,000. With property price caps, you are only responsible for 5% up to £625,000 which means that only £200,000 is subject to tax rather than the entire purchase price. Anything over £625,000 is subject to standard rates of tax and is not eligible for first-time buyer’s relief.
Non-resident rules
For properties costing more than £40,000, non-UK residents may have to pay an additional 2% on top of the existing Stamp Duty rates.
Special circumstances
In some cases, there might be some overlap between you buying a new main residence and selling your previous one. As long as you sell your home within three years of purchasing your new one and claim it within 12 months, you can apply for a refund of the higher SDLT rates paid when you purchased your new home.
Looking to discuss your mortgage options?
To learn more about Stamp Duty Land tax or assistance with your mortgage options, don’t hesitate to contact us. We’re here to help you navigate through your homeownership journey, so get in contact today.