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The Quick Buyers’ guide to stamp duty

If you’re looking to buy a property that costs over a certain price, you might have to pay stamp duty. The rules on stamp duty changed in December 2014 and it’s important for house buyers to keep up to date and understand how this tax works and how much they might have to pay.

What is stamp duty?

Stamp duty land tax (SDLT) is a tax that you have to pay if you buy a home for more than a certain amount in England, Wales or Northern Ireland. The amount you pay will depend on the purchase price of the property. The threshold is currently £125,000, unless the property is a second home. This means you will not have to pay stamp duty on a property that costs less than £125,000.

What are the rates of stamp duty?

Stamp duty is tiered in a similar way to income tax, with the rates rising for each purchase price band of the property.

The rates are:

0% on the first £125,000
2% between £125,001 and £250,000
5% between £250,001 and £925,000
10% between £925,001 and £1.5 million
12% above £1.5 million

Let’s say you bought a house for £350,000. You would pay nothing for the first £125,000. You would pay 2% on the next £125,000, totalling £2,500. You would also pay 5% of the final £100,000, adding another £5,000.

This means your total stamp duty liability would be £7,500.

What about stamp duty on second homes?

Second and subsequent homes, including those bought as buy-to-let, pay an extra 3% on each band. This includes the first band of £0 to £125,000, which rises from 0% to 3%. You will then pay 5% for the band between £125,001 and £250,000, 8% between £250,001 and £925,000, 13% between £925,001 and £1.5 million and 15% above £1.5 million.

This is payable on all second and buy-to-let homes bought for more than £40,000.

How do I pay stamp duty?

You will need to submit a stamp duty land tax (SDLT) return when you buy the property. You will need to fill in a return even if the cost of the house is under £125,000, although in this case you will not have any stamp duty to pay.

The solicitor dealing with your purchase will usually deal with both the return and the payment as part of the house buying process, but you can also do it yourself.