Stamp duty is a tax that needs to be paid by those who purchase property or land above a certain price in England and Northern Ireland. This tax is applicable when buying a freehold property, a new or existing leasehold, a property through a shared ownership scheme, or when taking on a mortgage or buying a share in a house. The amount of stamp duty owed depends on the property’s cost, its intended use, and whether the buyer owns any other properties.
Currently, buyers of homes valued at less than £250,000 are not required to pay stamp duty. This threshold was increased from £125,000 in September 2022 as part of Liz Truss’s mini-Budget. For first-time buyers, the threshold is set at £425,000, up from £300,000. However, these higher thresholds are set to expire in March 2025, reverting to previous levels. The current stamp duty rates are as follows:
– £0-£250,000 (£425,000 for first-time buyers) = 0%
– £250,001-£925,000 = 5%
– £925,001-£1.5m = 10%
– £1.5m+ = 12%
For those who already own a residential property valued at £40,000 or more and purchase another property, an additional 3% is charged on top of the standard rates, which will increase to 5% from 31 October. The single rate of stamp duty for firms acquiring dwellings worth over £500,000 will also rise from 15% to 17%. In the 2022/23 financial year, Stamp Duty Land Tax (SDLT) generated £15.4bn for the government, a 9% increase from the previous year.
In Scotland, buyers are subject to the Land and Buildings Transaction Tax (LBTT) with rates ranging from 0% to 12%, depending on the property value. Additionally, an Additional Dwelling Supplement (ADS) of 6% is imposed on purchasers who already own a residential property valued at £40,000 or more. In Wales, the Land Transaction Tax (LTT) rates vary from 0% to 16%, with higher rates applicable to those buying a second home or additional properties.
Buyers in England and Northern Ireland have 14 days from the completion date to pay stamp duty, while in Scotland and Wales, there is a 30-day window from the purchase date. Failure to pay within the specified timeframe may result in fines or interest charges. Payment can be made through solicitors, online, or in banks via cheque or cash. However, adding stamp duty to a mortgage loan may lead to increased interest payments in the long run.
