What is Stamp Duty? (And How Much Is It?)

Buying property is a pricey thing to do at the best of times, and having to pay Stamp Duty too certainly doesn't help!

But what is Stamp Duty? 

Stamp duty land tax, aka SDLT, is payable if you buy a property or land over a certain purchase price in England and Northern Ireland.  In Wales you would pay ‘land transaction tax’ (LTT) and in Scotland it is known as ‘land and buildings transaction tax’ (LBTT).  

Ok, so we now know what SDLT is. But what about how much is it? When do you pay it, and how does it vary across the UK? Is there any way to avoid paying stamp duty? We've covered all that for you here in our handy guide. Read on for more.

1. How much is stamp duty?

You will only have to pay SDLT on a property you have purchased if the property price reaches a certain threshold.  If the property price covers two or more thresholds, you will end up paying one rate on a certain portion of the price and a different rate on the remaining portion.  The rates of tax differ depending on where in the UK you are buying a property (though England and Northern Ireland rates are the same).

1.1 England and Northern Ireland

The current SDLT thresholds for residential properties in England & Northern Ireland are:

1.2 Wales

The current rates of Welsh LTT are:

1.3 Scotland

The current rates of LBTT are:

* If you are a first-time buyer, you will not pay land and buildings transaction tax on the first £175,000 of consideration payable in respect of the property.

2. Calculating stamp duty

Example

Let’s look at how much stamp duty you would owe if you bought a home worth £400,000 in England and you do not qualify for any reliefs:

Table showing calculation of stamp duty.

Completion date - 13th May 2022
Zero up to £125,000 2% on £125,001 - £250,000 = £2,500 5% on £250,001 - £400,000 = £7,500
Total SDLT due = £10,000

If you need help working out how much tax you’ll pay, the government have created helpful calculators to do the hard work for you:

• If you are purchasing a property in England/Northern Ireland use this calculator
• If you are purchasing a property in Wales use this calculator
• If you are purchasing a property in Scotland use this calculator

3. Stamp Duty on second homes

If you are buying a second home, buy-to-let property or a holiday home in England or Northern Ireland for more than £40,000, you will be charged an additional 3% on top of the standard SDLT rates.  In Scotland and Wales, it is a 4% surcharge on top of the usual LBTT and LTT rates respectively for any additional properties bought for £40,000 or more.

We have included the relevant multiple property rates in our tables above.  

Example

Let’s use our example from earlier but this time you are buying a second home (which will not be replacing your main residence) worth £400,000 in England on the following date:

Table showing calculation of stamp duty on second home.

Completion date - 13thMay 2022
3% on the first £125,000 = £3,750 5% on £125,001 - £250,000 = £6,250 8% on £250,001 - £400,000 = £12,000
Total SDLT due = £22,000

4. Stamp Duty Reliefs (How to avoid stamp duty within the law)

There are a number of reliefs from SDLT for residential properties.  We have listed a couple of examples of the reliefs available in England and Northern Ireland below.

4.1 First-time buyer’s relief (on acquisitions not exceeding £500,000)

Broadly, the conditions are:

• You must be purchasing a ‘major interest’ (a freehold or leasehold interest) in a single residential dwelling
• The purchase price must not exceed £500,000
• The buyer (or each buyer) is a first-time buyer who intends to occupy the property as their sole/main residence
• The transaction is not linked to another transaction
• The supplemental 3% SDLT charge does not apply to the transaction

If you are eligible for first-time buyer’s relief, then the following rates will apply:

4.2 Multiple dwellings relief

If you acquire more than one dwelling in the same or linked transactions, multiple dwellings relief operates by applying the rates of SDLT chargeable on each dwelling by reference to the mean consideration (which is the aggregate consideration divided by the number of dwellings).

Example

Let’s say John is buying two properties in England that will complete on 13th May 2022. One property is worth £250,000 and the other property is worth £500,000.

1. Step 1: Calculate the mean consideration, which is £250,000 + £500,000 / 2 = £375,000.
2. Step 2: Calculate the SDLT due on the mean consideration (remember the 3% surcharge will apply here as John is purchasing multiple properties) = £125,000 at 3% = £3,750, £125,001 - £250,000 at 5% = £6,250, and £250,001 - £375,000 at 8% = £10,000. Total = £20,000.
3. Step 3: Multiply the SDLT due on the mean consideration by the number of properties, £20,000 x 2 = £40,000.

SDLT due without the multiple dwellings relief would be £50,000 (3% x £125,000 plus 5% x £125,000 plus 8% x £500,000), so you will have saved £10,000 in SDLT.

5. Speed up your home-moving process

Unfortunately, stamp duty is unavoidable and is a cost you'll need to factor in when looking for your dream home. If you have found your dream home but don’t yet have a buyer for your own property, we can help get you moving much sooner than you might think.

Related: Read my article on the fastest way to sell your house.

If you have any additional questions or are looking to sell a property, please give me a call now on 0330 223 5568.