Stamp duty is a property purchase tax payable in England and Northern Ireland. When you buy a residential property or a piece of land costing more than £125,000 you are liable to pay stamp duty. For the purchase of second homes, the stamp duty threshold is £40,000.
The property buyer is responsible for paying the stamp duty tax based on the purchase price, not on the amount borrowed with a mortgage. This may all sound a bit confusing. That’s why we’ve created our beginner’s guide to stamp duty to try and provide a clearer picture.

A Beginner’s Guide to Stamp Duty

How to Calculate Stamp Duty

The rate of stamp duty to pay is divided into percentage price bands:

  • 0% on the first £125,000
  • 2% on the next £125,000 (the value between £125,001 to £250,000)
  • 5% on the next £675,000 (the value between £250,001 to £925,000)
  • 0% on the next £575,000 (the value between £925,001 to £1.5 million)
  • 12% on the remaining amount (the portion above £1.5 million)

If you know the value of a property you plan to purchase the money advice service has a beginner’s guide to stamp duty calculator.

Second Home Stamp Duty

If you are buying a second property, perhaps as a holiday home or a buy to let, then the rate of stamp duty you are required to pay is different than if you own just one property.

For second properties costing £40,000 or more, the buyer is responsible for paying stamp duty tax.

The rate increases by an additional 3% on top of the standard stamp duty for each band. This doesn’t apply to caravans, mobiles homes or houseboats.

First Time Buyers Relief

If you have never owned a property before you are classified as a first-time buyer. If you are purchasing a property as a couple, you will both need to be classified as first-time buyers to be eligible for stamp duty tax relief.

The first-time buyer tax relief scheme was introduced in 2017 to help support new property owners. As property prices increased out of sync with the cost of living, the government created a tax relief scheme to encourage first-time buyers.

For house purchases of up to £300,000, no stamp duty needs to be paid by first-time buyers.

For properties that cost £300,001 up to £500,000, first-time buyers will pay 5% on any value over £300,000. For example, if the property costs £350,000, you would pay 5% stamp duty tax on £50,000.

If a first-time buyer purchases a property costing over £500,000, then they are not eligible for any relief. The standard levels of stamp duty will be payable.

When does Stamp Duty have to be paid?

Stamp duty tax is due once you have completed the purchase of your property. It is normal for your solicitor to handle the payment, but it is the buyer’s responsibility to check that that it has been paid.

If you are considering purchasing a property is it important for you to calculate if you can afford the stamp duty and solicitors fees.

Mortgage Advice

If you want to buy a property but aren’t sure if you can afford it, a mortgage broker can help. At Elementary Mortgage Solutions, we search the market for the best deals for you to find out what is possible. We also provide advice and guidance on all aspect of buying a house and can answer any questions you may have.

To find out more, contact our team of mortgage advisors.

The content of this post was accurate at the point of publication and is subject to change.