Stamp Duty - Advice & Everything You Need To Know

Stamp Duty may seem confusing to start with; however, it is essential you get to grips with it before purchasing g a property. If you are buying a property in Northern Ireland or England above the cost of £125,000, then Stamp Duty Land Tax (SDLT) will also need to be purchased.

This article is a guide on everything you need to know about Stamp Duty.

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What is Stamp Duty?

So, lets get going. What is stamp duty exactly? Well, when buying a property in either Northern Ireland or England, you will be liable to paying Stamp duty on either land or a residential property that has been sold for more than £125,000. Stamp Duty applies to both leasehold and freehold properties, no matter whether you purchase outright or with a mortgage.

If you are buying property in Scotland, make sure you research into Land and Buildings Transaction Tax (LBTT); and if you are buying in Wales, read up on Land Transaction Tax.

How much will Stamp Duty cost me?

Depending on the price tag that comes with the property will depend on how much Stamp Duty tax will need to be paid.

There are several bands which can help you to understand where your property will be placed.

Stamp Duty Rates

£0-£125,000 – Stamp Duty doesn’t apply

£125,001-£250,000 – the Stamp Duty Land Tax will be 2%

£250,001-£925,000 – the tax will be 5% of the property

£925,001-£1,500,000 – SDLT will be 10% the property

Over £1,500,000 – anything above this bracket will be 12%

However, please bare in mind that stamp duty for residential leasehold properties are different and will be therefore charged differently.

What if I am a first-time buyer?

The Stamp Duty tax works slightly differently for those who are first time buyers. Any first-time buyer in Northern Ireland or England will not have to pay Stamp Duty tax on a property worth up to £300,000. This allows first-time buyers to save.

Properties that are above the price of £500,000, then there will be no tax on the first £300,000 of the property. Meaning that a buyer will only have to pay on the remaining £200,000.

Properties over the £500,00 band will not qualify for buyer’s relief around Stamp Duty. Meaning, that you would have to pay Stamp Duty normally.

Stamp Duty on Second Homes

Those who are buying any additional properties, for example buy to lets or second homes, you will have to pay an extra rate on top of the current stamp duty tax. On top of paying for the current band, buyers will have to pay an extra 3% of stamp duty. For example, if your property was between £250,001-£925,000 then the stamp duty would be 8%.

This increase of 3% stamp duty applies to properties bought over £40,000.

This only applies to properties however, not mobile homes, house boats or caravans.

You can apply for a refund on stamp duty of you sell your main home within three years of buying two homes. There is a process on the government website that you can follow.

How do you pay Stamp Duty?

When it comes to actually paying Stamp Duty, usually your solicitor will help you deal with it. However, you can sort it yourself. Either route you decide to take, it is your responsibility to make sure all the relevant documents are submitted to HMRC and everything is paid.

If a property is under £125,000, even though there will be no payment needed, the relevant documents need to be submitted to HMRC.

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When do I need to pay Stamp Duty?

Homeowners must file to pay their SDLT within fourteen days. This amount of days has been reduced, as in March it used to be thirty days.

The fourteen days starts to tick from the effective date of the transaction. Basically, this means the day you complete the purchase of your new property.

If you do not complete this within fourteen days then the HMRC may issue you with fines that include interest.