Stamp duty is one of the biggest upfront costs of buying a property in the UK, yet many buyers are surprised by how much they owe when they reach completion. Understanding how it works before you start house hunting will help you budget accurately.
- What is stamp duty?
- How stamp duty is calculated
- First-time buyer relief
- Additional property surcharge
- When do you pay stamp duty?
What is stamp duty?
Stamp Duty Land Tax — commonly called stamp duty — is a tax paid to the government when you buy a residential property in England or Northern Ireland. Scotland has its own equivalent called Land and Buildings Transaction Tax, and Wales uses Land Transaction Tax. The rates differ in each country.
How stamp duty is calculated
Stamp duty is calculated on a tiered basis, meaning you only pay each rate on the portion of the purchase price that falls within each band. For home movers in England, the current rates are zero on the first £125,000, 2% on the portion between £125,001 and £250,000, 5% on the portion between £250,001 and £925,000, 10% between £925,001 and £1.5 million, and 12% on anything above that.
This means on a £300,000 property, a home mover pays zero on the first £125,000, £2,500 on the next £125,000, and £2,500 on the final £50,000 — a total of £5,000.
First-time buyer relief
First-time buyers in England pay no stamp duty on the first £425,000 of a property purchase. On the portion between £425,001 and £625,000 they pay 5%. For properties over £625,000, standard rates apply with no first-time buyer relief.
This means many first-time buyers pay no stamp duty at all, and those buying up to £625,000 pay significantly less than home movers.
Additional property surcharge
If you are buying an additional property — a second home, a buy-to-let, or a holiday cottage — you pay an extra 3% surcharge on top of all standard rates. This applies even if you are in the process of selling your main residence, though you can reclaim the surcharge if you sell within three years.
When do you pay stamp duty?
Your solicitor or conveyancer handles the stamp duty payment. It must be submitted to HMRC within 14 days of the completion date, so make sure you have the funds available well before you exchange contracts.
Bottom line
Stamp duty can add thousands of pounds to the cost of buying a home and must be paid from your own funds — most lenders will not add it to your mortgage. Use our free stamp duty calculator on SimpleMoney.live to work out exactly what you will owe before you start your property search.