FAQ - How much is Stamp Duty?

FAQ - How much is Stamp Duty? [Photo: iStock]

Stamp Duty, or Stamp Duty Land Tax, to give it its full title, is a tax that is payable by anyone when they buy a home or property in England and Wales that comes in at a price higher than the respective thresholds. As a general rule of thumb, anyone spending more than £125,000 on a residential property, or £150,000 on a commercial property, will need to pay Stamp Duty.

You will pay Stamp Duty if you are; buying a freehold property, a new or existing leasehold, buying through a shared ownership scheme or if you buy a share in or take on a mortgage for a house. 

How much is Stamp Duty?

The price you pay for Stamp Duty has changed in recent times from one block payment based on the entire value of your home to a system whereby each part of the value of your home that falls into each price band will be taxed differently. This has made it cheaper in most cases. 

For example, if you buy a home that is worth £300,000, you would have paid three per cent of this value (£9,000) under the old system. However, under the new rules introduced in 2014, you now pay two per cent of the proportion between £125,000 and £250,000 (£2,500) and five per cent of the value above £250,000 (£2,500), giving you a total price of £5,000. 

To work out what you would have to pay on any property purchase, the government has released an easy to use Stamp Duty calculator

Who pays Stamp Duty?

Stamp Duty is paid by anyone who is buying a residential property costing more than £125,000. Regardless of your position on the property chain, the tax is always paid by the buyer and not the seller, and will always need to be factored into decisions over budgeting and purchases. 

How do I pay Stamp Duty?

When you have purchased a house, the next stage is to fill in a Stamp Duty Land Tax return and send it to the government. Thereafter, you will have 30 days to settle the bill and pay your Stamp Duty charge to the government. 

This is something that you as the buyer can do yourself, but in the majority of cases, it's something that the solicitor dealing with your purchase will manage. They will normally fill in the return and pay Stamp Duty on the day of completion, and simply bill you for it along with all their other fees, making the whole process much smoother. 

Do I have to pay the surcharge?

Not unless you are buying a home to let out to tenants. Only those who are buying a home that is not their primary residence have to pay the additional three per cent Stamp Duty surcharge on top of the standard charge. If you are simply buying a house that you will be moving into, then you will only be expected to pay the standard rate. 

However, those who move home without having first sold their previous property will have to pay the three per cent surcharge. This is refundable, however, as long as you manage to sell the original home within the first 36 months after you pay the surcharge. 

If you would like more information about this, read our FAQ on the Stamp Duty surcharge.