Stamp Duty – Two Levels
Stamp Duty is a tax that is paid whenever you buy land or property. The amount charged depends on a number of factors including the type of property. In this article we are looking at UK main residence stamp duty.
There are two levels of stamp duty for standard residential stamp duty purchases in the UK.
The first level is for people who are purchasing their first property (both purchasers if there are more than one) or who are replacing their main residence. This is the Standard Stamp Duty rate.
The second level is an enhanced rate for those who are purchasing a second or subsequent property (i.e. those who already own or part own a property). In this case, the government introduced an extra level of stamp duty that became payable from 1st April 2016. The extra stamp duty amounts to 3% of the entire purchase price for properties costing over £40,000. You can find out more information about the extra stamp duty payable here.
Exceptions
In the 2017 Budget the Chancellor announced that First Time Buyers would be exempt of Stamp Duty for property purchases up to the value of £300,000. This was updated in September 2022 to £425,000.
In addition, on 8th July 2020 the Chancellor announced that the first £500,000 of the transaction would be charged at 0% temporarily until 31st March 2021 to get the housing market moving after the Covid-19 pandemic. This was extended at half the rate until October 2021. The rates then reverted back to the previous standard rates. On 22nd September 2022 the threshold was increased to £250,000.
How it is Calculated
If you are not a First Time Buyer then the standard level of stamp duty is calculated as follows:
Residential properties costing under £250,000 – no stamp duty is payable.
The rates are then tiered for various portions of the property price as follows:
£250,000 to £925,000 – 5% of that portion
£925,000 to £1.5m – 10% of that portion
Anything over £1.5% – 12% of that portion.
As shown above you need to calculate each portion separately. This new method was introduced a few years ago to combat the big jumps in stamp duty that previously existed when properties sold over a particular threshold.
Although this does make it slightly more difficult to work out how much you will need to pay there are stamp duty calculators that will do it for you and you can find ours here.
Below is a quick reference table to show you the amounts of stamp duty payable for a main residence purchase at a set of purchase prices. If you do not find your purchase price here then you can use the stamp duty calculator (link in previous sentence) to work out how much is due.
The tax needs to be paid within 14 days of the completion of the purchase (this was updated in 2019 as it was previously 30 days). Payment is quite often facilitated by the solicitor who is carrying out the conveyancing for you. However, you can make the payment yourself if you wish to, provided it is done within the time frames allowed.