A Quick Guide to Stamp Duty

by Rizwan Osman on 2nd August 2021

If you’re buying a house, you need to factor the cost of stamp duty into your budget. There have been many changes to the tax, including the tapered end to the stamp duty holiday, so it is essential to understand how the tax works. Read on for our quick guide to stamp duty.

Stamp duty explained

What is stamp duty?

Stamp duty is a one-off tax paid by the buyer of residential property in England and Northern Ireland. Stamp duty rates are tiered, so you pay different rates on each portion of the property price. (Scotland and Wales have a similar tax but with different rates.)

There is tax relief for first-time buyers and surcharges that apply to overseas buyers and those buying an additional or buy-to-let property.

Tax band thresholds between 1st July 2021 and 30th September 2021

Between 8th July 2020 and 30th June 2021, buyers haven’t had to pay stamp duty on the first £500,000 of the purchase price. From July to September, tapered rates apply before the thresholds return to normal in October.

The stamp duty rates for purchasing a main residence between 1st July 2021 and 30th September 2021 are:

  • Up to £25,000 – 0%
  • £250,001 to £925,000 – 5%
  • £925,001 – £1,500,000 – 10%
  • From £1,500,001 – 12%

Tax band thresholds from 1st October 2021

From 1st October 2021, the stamp duty rates return to normal.

  • Up to £125,000 – 0%
  • £125,000 – £250,000 – 2%
  • £250,001 – £925,000 – 5%
  • £925,001 – £1,500,000 – 10%
  • From £1,500,001 – 12%

How much will I pay?

If you buy a house or flat with a purchase price of £650,000 before 30th September 2021 as your main residence, you would pay the following in Stamp Duty:

  • 0% on the first £250,000 (£0)
  • 5% on the remaining £399,999 (£20,000)
  • Total SDLT = £20,000

If you buy the same property from October 2021, you will pay a little more in stamp duty:

  • 0% on the first £125,000 (£0)
  • 2% on the amount between £125,001 and £25,000 (£2,500)
  • 5% on the remaining £399,999 (£20,000)
  • Total SDLT = £22,500

How much is stamp duty?

First-time buyers and stamp duty

First-time buyers in England and Northern Ireland benefit from tax relief on stamp duty.

First-time buyers purchasing a property worth up to £500,000 pay 0% SDLT on the first £300,000 and pay 5% on the portion between £300,001 and £500,000. First time buyers purchasing property for more than £500,000 will not be entitled to any relief and will pay SDLT at the regular rates.

To qualify for first-time buyer stamp duty relief, you must never have owned residential property before. If you have previously owned part of a property or have inherited a property, you won’t be considered a first-time buyer.

First-time buyers purchasing a buy-to-let property are not entitled to tax relief and must pay stamp duty at the standard rates.

Higher rates for additional properties

You will pay 3% on top of the standard stamp duty rates if buying a residential property means you will own more than one home.

You will not pay the extra 3% if the property you’re buying is replacing your main residence and has already been sold.

If there’s a delay in selling your main home, and it has not been sold on the day you complete on your new property, you will have to pay the higher rate. However, you may be able to get a refund if you sell your previous main home within 36 months.

Surcharge for overseas buyers

Buyers from overseas must pay a 2% surcharge on top of the standard stamp duty rates. The higher rate for additional properties also applies here, so an overseas buyer purchasing a buy-to-let property will pay an extra 5% on the standard rates for home movers.

When and how to pay

You have 14 days from the completion of the sale to pay your stamp duty bill. Your solicitor will usually deal with the stamp duty return for you in practice, but you are still responsible for completing it on time. The penalty for late payment is a £100 fine.

If you’re thinking of buying property in Tooting, Balham, Clapham or Streatham, contact us today for more advice about stamp duty and other aspects of finding your new home.