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What is Stamp Duty and How Much Does it Cost?

What is Stamp Duty and How Much Does it Cost?
Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: July 6, 2022

What is Stamp Duty and How Much Does it Cost?

Stamp duty is a tax paid on residential homes and land bought in England or Northern Ireland for £125,000 or more. Different rules apply in Scotland and Wales.

There are some exemptions, notably for first-time buyers who pay no stamp duty on properties bought for up to £300,000.

It applies to freehold and leasehold properties bought outright or with a mortgage.

Non-UK residents buying property in England or Northern Ireland may have to pay an additional 2% on top of the existing rate due.

  • How is stamp duty calculated?
  • Non-standard rates
  • Exemptions
  • When is it payable?
  • Speak to a stamp duty expert

How is stamp duty calculated?

Rates are separated into bands and calculated as a progressive rate system. This means that, rather than paying a flat rate for the whole property, you pay a different percentage on each portion of it according to the price.

This is illustrated below:

Property Value Stamp Duty Rate
Up to £125,000 0%
Next £125,000 (portion from £125,001 - £250,000) 2%
Next £675,000 (portion from £250,001 - £925,000) 5%
Next £575,000 (portion from £925,001 - £1.5 million) 10%
Any portion above £1.5 million 12%

So, if you bought a house for £400,000, your stamp duty would be calculated as follows:

First £125,000: 0% (£0)
Portion from £125,001 - £250,000: 2% (£2,500)
Portion from £251,000 - £400,000: 5% (£7,450)
Total stamp duty payable: £9,950

NB: These rates are due on main residential homes for those who are not first-time buyers.

Non-standard rates

Rates differ slightly for:

  • First-time buyers
  • Additional homes (including buy to lets)
  • New leasehold properties

First-time buyers

First-time buyers pay no stamp duty on properties bought for up to £300,000. To qualify for this tax relief as a first-time buyer, you must have never owned a home previously in the UK or abroad. You are ineligible even if you inherited property and sold it immediately without ever living in it.

Stamp duty rates for first time buyers are:

Up to £300,000: 0%
Portion from £300,001 - £500,000: 5%

There is no tax relief above £500,000 so for any portion of the property above this, refer to normal rules.

So, stamp duty for first-time buyers purchasing a home for £600,000 will be:

First £300,000 0% (£0)
Portion from £300,001 - £500,000: 5% (£10,000)
Portion above £500,000: 5% (£5,000)
Total stamp duty payable: £15,000

Additional homes

The rates for additional homes are 3% above the standard rate:

Property Value Stamp Duty Rate
Up to £125,000 3%
Next £125,000 (portion from £125,001 - £250,000) 5%
Next £675,000 (portion from £250,001 - £925,000) 8%
Next £575,000 (portion from £925,001 - £1.5 million) 13%
Any portion above £1.5 million 15%

NB: No stamp duty is paid on additional homes bought for under £40,000. If you buy a home for between £40,000 and £125,000, you will pay 3% stamp duty on the entire price of the property, not just the portion above £40,000.

Leasehold homes

Generally, stamp duty for leasehold homes is the same as for any other property.

However, when buying a new-build or a property that has recently been divided into individual leaseholds, you will  pay an extra 1% if the total value of the rent due over the lifetime of the mortgage exceeds £125,000.

Exemptions

Stamp duty is not payable on:

  • Caravans
  • Mobile homes
  • Houseboats
  • Properties transferred by pursuance of a court order
  • Property inherited in a will
  • Property that is gifted

When is it payable?

Stamp duty must be paid within 14 days of completion. Often, your solicitor will do this for you but the legal responsibility to ensure it is paid on time remains with you.

You must submit a return even if no stamp duty is due.

Speak to a stamp duty expert

Stamp duty can have a significant impact on affordability and your overall cost of borrowing. Some lenders will allow you to add stamp duty to your mortgage, but you will need to consider this carefully as it will affect your repayments and loan to value ratio.

Our broker matching service will assess your circumstances and pair you with an expert mortgage advisor who will help you calculate stamp duty costs and work out the best mortgage for you.

Call us on 0808 189 2301 or enquire online to arrange a free, no-obligation chat.

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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