What is Stamp Duty?

When you buy a property in the UK, you’ll need to pay tax. In England and Northern Ireland this is called Stamp Duty Land Tax, or just Stamp Duty. In Wales it’s called Land Transaction Tax and in Scotland it’s called Land and Buildings Transaction Tax.

The amount of Stamp Duty you pay will vary depending on a number of factors, including whether or not you’re a first-time buyer.

Stamp Duty is typically levied on any transaction that involves an exchange of property. This includes transactions such as:

• buying a freehold property
• buying a new, or existing leasehold property
• buying a share of a property through a shared ownership scheme
• buying any commercial property
• buying a buy-to-let property 

You may be entitled to certain concessions, for instance if you’re a first-time buyer.

You have 14 days after you complete the purchase of your property to file a return to Her Majesty’s Revenue and Customs (HMRC). However, you probably won’t need to take any action yourself, as your conveyancer should collect Stamp Duty money from you in advance and will usually file a return on completion day.

The Government has announced a Stamp Duty holiday from 8 July 2020 until 31 March 2021. 

If you’re looking to buy your first property or move home, they won’t charge Stamp Duty on the first £500,000 of a property purchased – as long as the home you’re buying will be the only home you own.

This is a temporary measure and if you’ll own more than 1 property, the 3% extra Stamp Duty will still apply.

This means that, during this time, if you buy your first, or only, property in England and or Northern Ireland for £500,000 or less, you won’t have to pay Stamp Duty. If you buy a property for more than £500,000, or an additional property, you will pay significantly less in Stamp Duty.

The tables below show you how much you could save during the Stamp Duty holiday.

The starting threshold for Land and Buildings Transaction Tax (LBTT) for residential property transactions will temporarily be raised from £145,000 to £250,000.

This means that, during this time, if you buy your first, or only, property in Scotland for £250,000 or less, you won’t have to pay LBTT.

If you buy a property for more than £250,000, or an additional property, you will pay significantly less in LBTT. If after the purchase you own more than 1 property, the Additional Dwelling Supplement (ADS) remains at 4% of the purchase price.

Changes to the Land Transaction Tax (LTT) rates and thresholds will apply to residential property purchases from 27 July 2020 to 31 March 2021. The starting threshold for LTT main residential rates will be set at £250,000.  

This means those buying their only property costing less than £250,000 will pay no LTT and those buying their only property for more than £250,000 will make a saving of £2,450. These changes will not apply to those buying property as an investment, or those owning more than 1 property after the transaction.

So, if you were buying a property worth £1,000,000, you would pay:

• 0% of the value below £125,000 = £0
• 2% of the value between £125,001 and £250,000 = £2,500
• 5% of the value between £250,001 and £925,000 = £33,750
• 10% of the value between £925,001 and £1,000,000 = £7,500

Making the total Stamp Duty payable = £43,750

For second properties in Scotland you pay an extra 4% on the total value of the property.

First-time buyers in Scotland do not pay any tax on the first £175,000 of the value of their property.

There are no concessions for first-time buyers in Wales.

You may be entitled to a discount depending on your circumstances and the type of property you’re buying. Exceptions include:

• zero-carbon homes and flats under £500,000 are exempt from Stamp Duty, while those over £500,000 have their Stamp Duty bill reduced by £15,000
• right-to-buy transactions may qualify for a discount
• charities can apply for Stamp Duty relief when buying property for charitable purposes
• registered social landlords may be able to apply for relief