What is stamp duty?

Posted 14 December 2015 by Keith Osborne

Find out here everything you need to know about stamp duty.

What is stamp duty?

Stamp Duty Land Tax (to give it its full name) is a government-charged tax that must be paid when purchasing a property or land in the UK, except Scotland. It applies to both freehold and leasehold properties but is only paid on properties worth more than £125,000.

Stamp duty in the UK must be paid by anyone who is purchasing a property in England, Wales or Northern Ireland, which is valued at over £125,000.Stamp duty must be paid within 30 days of you taking possession of the property.

In the 2014 Autumn Statement, changes were made to the amount of tax paid on properties, meaning that buyers of lower valued properties pay less than they would have previously had to, but rates at the higher end of the scale increased. So, the new stamp duty rates aim to help first-time buyers purchasing less expensive properties, helping to make their first home more affordable.

Previously, properties over £250,000 would be charged at 3% and properties over £2m paid 7%. Now, although the new system may save you money on your taxes, it is slightly more complicated: 

No stamp duty is owed on properties under £125,000 
2% is payable on the portion of a property valued between £125,000 and £250,000 •
5% is payable on the portion valued between £250,000 and £925,000 
10% on the portion valued between £925,000 and £1.5m 
12% on the portion valued above £1.5m
So, for example, if you purchase a property for £500,000, you would pay nothing for the amount up to £125,000, you would pay £2,500 for the part of the property valued between £125,000 and £250,000, and you would pay £12.500 for the part valued at £250,000 - £500,000. This means that, in total, you would pay £15,000 Stamp Duty on a property valued at £500,000. 

Buyers in Scotland do have to pay a similar tax, but since April 2015 stamp duty was replaced by  Land and Buildings Transaction Tax. Similar to the new stamp duty structure, this tax is paid in proportion with the price of the property over certain thresholds.

In the recent Autumn Statement, Chancellor George Osbourne announced further changes to stamp duty; from April 2016, an additional charge of 3% will be applied to anyone buying a second home or a buy-to-let home, in order to give those looking for a home to buy for themselves and their family more of a chance in the market.


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