What is stamp duty?

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?
There’s been a pretty big shake up of stamp duty over the past 18 months, especially given the stamp duty holiday put in place by the government. Currently, in England and Northern Ireland, the stamp duty threshold has temporarily been raised and there is no stamp duty to pay on properties or land up to £500,000. Any figure over that and the following rates apply:

  • For properties between £500,001 and £925,000, stamp duty is set at 5% of the value  over £500,000.
  • For properties priced £925,001 to £1.5 million, stamp duty is set at 10% of the value over £500,000.
  • And for properties costing more than £1.5 million you will pay 12% on anything over £500,000.

From 1st July 2021, these numbers change, with no stamp duty to pay on properties costing up to £250,000.

  • For properties between £250,001 and £925,000, stamp duty is 5% of the value over £250,000.
  • For properties priced £925,001 to £1.5 million, stamp duty is set at 10% of the value over £250,000.
  • And for properties costing more than £1.5 million you will pay 12% on anything over £250,000.

Things will change once more from 1st October 2021, with no stamp duty on properties costing up to £125,000.

  • For properties between £125,001 and £250,00, stamp duty is 2% of the value over £125,000.
  • For properties between £250,001 and £925,000, stamp duty is 5% of the value over £125,000.
  • For properties priced £925,001 to £1.5 million, stamp duty is set at 10% of the value over £125,000.
  • And for properties costing more than £1.5 million you will pay 12% on anything over £125,000.

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.

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.

Why the stamp duty holiday?
It’s all part of the government’s plan to kick start the economy and the housing market.

The stamp duty holiday was announced in July 2020 and was due to run until 31st March 2021. That deadline has since been extended until 30th September 2021.

If you’re wondering ‘when does the stamp duty holiday end?’, the figures above tell you all you need to know. As for the question of will the stamp duty holiday be extended again, as far as we know, there won’t be any further stamp duty holiday extensions. However, it’s worth keeping an eye on the news for any further developments.

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
With stamp duty holidays and the temporary lifting of thresholds, home buyers have benefitted hugely. 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.

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