What is stamp duty?

If you’re in the market for a new home, you’ll no doubt have heard of stamp duty, but may not know exactly what it means. Put simply, stamp duty is a tax you must pay when you buy a property or land above a certain price.

You pay stamp duty on both freehold and leasehold properties regardless of whether you’re buying outright or with the help of a mortgage. The details of how stamp duty is applied – and what you must pay – is changing, but we’re here to clear things up for you.

How much is stamp duty?
Currently, in England and Northern Ireland, the stamp duty thresholds are as follows:

Properties up to the value of £125,000, stamp duty is set at 0%
The next £125,000 (the portion from £125,001 and £250,000), stamp duty is set at 2%
The next £675,000 (the portion from £250,001 and £925,000), stamp duty is set at 5%
The next £575,000 (the portion from £925,001 and £1.5 million), stamp duty is set at 10%
The remaining amount (the portion over £1.5 million), stamp duty is set at 12%

Do first time buyers pay stamp duty?
There’s some good news for first time buyers. From 1st July 2021, you’ll pay no stamp duty on properties worth up to £300,000. If you’re looking at properties up to £500,000, there’s nothing to pay on the first £300,000 and you’ll only pay stamp duty of 5% on the remaining £200,000.

Note: You’re eligible for this stamp duty relief if you and anyone else you’re buying with are first-time buyers.

If you buy a property worth over £500,000 there’s no first-time buyer’s relief available and you’ll pay the standard stamp duty rate.

Stamp duty on second homes and Buy to Let
If you’re spending more than £40,000 on an additional property – such as a second home, Buy to Let, or holiday home – you’ll have to pay an extra 3% in stamp duty on top of the above rates up until 30th June 2021. This doesn’t apply to caravans, mobile homes or houseboats.

The big takeaway – factor stamp duty in
The best piece of advice we can give is to factor stamp duty into your budget when house-hunting. Look at the value of a property and calculate what stamp duty you’ll pay.

There is a useful Stamp Duty calculator on the Government website to help provide clarity on how much Stamp Duty you need to pay on your next property.

This will give you a true picture of the price and hopefully help you avoid any nasty surprises further down the line.