A Guide To Stamp Duty
If you’re in the process of buying a home, or plan to in the near future, you’ve likely heard the term stamp duty mentioned, and you might be wondering what it means and whether it applies to you. Our helpful guide to stamp duty provides all the key information you need to stay informed throughout the process of finding your forever home.
What is stamp duty?
Stamp duty, also known as stamp duty land tax (SDLT), is a tax often payable on documents associated with the purchase of property or land in the UK. It is paid to the government and will allow you to receive a certificate of land ownership from HM Revenue and Customs. This will state that the land, or the land where your new house sits, both officially and legally belongs to you, making it an essential part of buying a home.
Do I have to pay stamp duty?
Yes, you have to pay stamp duty; only first-time buyers and those purchasing a property or piece of land less than £125,000 are exempt. If these circumstances don’t apply to you, you will have to pay stamp duty, and you will not be able to receive your certificate confirming the change in land ownership until you have done so. See below a breakdown of the stamp duty thresholds and what percentage you will pay on stamp duty:
- Properties up to £125,000 – you won’t have to pay any stamp duty
- £125,001 to £250,000 – 2% SDLT rate
- £250,001 to £925,000 – 5% SDLT rate
- £925,001 to £1.5m – 10% SDLT rate
- Over £1.5m – 12% SDLT rate
If you’re not a first-time buyer, and your new home is worth £300,000, for example, you will pay £5,000 for stamp duty. Use this handy stamp duty calculator to work out how much you will have to pay on your next home.
What if I’m buying a new build home?
Even if you’re buying a brand new home, you’ll still have to pay the same amount of stamp duty as you would if you were purchasing a resale property. If you’re buying a Shared Ownership property, you can either pay Stamp Duty just on the share you’re purchasing, pay based on the full property value upfront so nothing is due later, or defer paying until you own more than 80%.
Do first time buyers pay stamp duty?
It depends, if your first home is under £300,000, then you won’t have any stamp duty to pay. If the home you’re purchasing is valued over £300,000, then you will have to pay stamp duty on this. For first-time buyers opting for a property under the £300k threshold, this is a huge help, as it cuts out an expense when there are already so many things to budget for, making it easier to get on the property ladder.
If you are buying a home with a partner, friend, or family member, both parties must qualify as first-time buyers to be eligible for stamp duty relief. Read our helpful guide on first-time buyer stamp duty for more information.
What classes as a first-time buyer?
If you have never owned a property or land before, you are classed as a first-time buyer and will be eligible for stamp duty relief. This is providing the property you’re purchasing is going to be your primary residence, as well as being your first home that you are buying for under £300,000.
This means that if you are not planning to live in the property and intend to use it as a buy-to-let, you will have to pay stamp duty land tax on your purchase, even if you are a first-time buyer. The same goes if you have already inherited a property, although you haven’t purchased it; you have still owned one before, which means you won’t be eligible for first-time buyer stamp duty relief.
When do I have to pay stamp duty?
Stamp duty is usually payable at the time of completion, and you will be given 14 days from the official date of property purchase to pay your stamp duty tax. This process will typically be taken care of by your solicitor, who will pay the tax for you and then add the amount onto your final bill to make things easier for you. If you would rather sort this out yourself, this is also fine, and you can find information on how to do this on GOV.UK. Make sure to let your solicitor know in good time that you are going to take care of this yourself, and that they don’t need to do anything.
Can I add stamp duty to my mortgage rather than paying it up front?
Yes – but only if your lender allows you to increase your mortgage amount and the total loan still falls within your loan-to-value (LTV) and affordability limits.
There isn’t a separate add-on for Stamp Duty, you will simply be borrowing more money overall. For example, if a lender says you can borrow up to £200,000 and you currently only need £190,000 to buy the property, you may be able to increase the mortgage to cover the Stamp Duty. Remember, borrowing more means higher monthly payments and more interest over time.
Are you searching for your first or next home?
Whether you’re searching for your first home or your next home, we hope our guide to stamp duty has helped you understand what this is for and how much, if anything, you will need to pay. If you’re swaying towards a new build home as opposed to a resale property, and you’re on the hunt for new homes in South Staffordshire with a community feel, our Wrottesley Village development could be precisely what you’re looking for. Register for updates today to stay up to date with what’s happening at County Town Homes!
