Close

What is stamp duty and when do you pay it?

POSTED: 12th January 2016
IN: Personal Guides
Share:

Aldermore explains some key facts you need to know about Stamp Duty.

What is stamp duty?

Stamp Duty, or Stamp Duty Land Tax (SDLT), is a tax that you pay when you purchase a property or land over a certain price in England, Wales or Northern Ireland. In Scotland you are required to pay Land and Buildings Transaction Tax when you purchase a property, rather than Stamp Duty. 

Stamp Duty applies to both freehold and leasehold properties, regardless of whether you’re buying outright or with a mortgage. It also applies when buying a property through a shared ownership scheme, or when you are transferred land or property in exchange for payment, such as when you take on a mortgage or buy a share in a house.

How much will you pay?

The amount of Stamp Duty you will have to pay will depend on whether the property or land is for residential or non-residential use.

Currently, the Stamp Duty threshold stands at £125,000 for residential properties and £150,000 for non-residential land and properties. You won’t pay any tax on properties that are below these values.

The below tables demonstrate how much Stamp Duty you are required to pay, depending on the price paid for the property or land.

Residential property

Property or lease premium or transfer value

Stamp Duty rate

Up to £125,000

0%

The next £125,000 (the portion from £125,001 to £250,000)

2%

The next £675,000 (the portion from £250,001 to £925,000)

5%

The next £575,000 (the portion from £925,001 to £1.5 million)

10%

The remaining amount (the portion above £1.5 million)

12%

 

Non-residential and mixed-use land and property – Freehold sales and transfers

Property or lease premium or transfer value

Stamp Duty rate

Up to £150,000 – freehold or leasehold with annual rent under £1,000

0%

Up to £150,000 – leasehold with annual rent of £1,000 or more

1%

£150,001 to £250,000

1%

£250,001 to £500,000

3%

Over £500,000

4%

 

Non-residential and mixed-use land and property – Freehold sales and transfers

Net present value of rent

Stamp Duty rate

Up to £150,000

0%

The portion over £150,000

1%

 

How and when do you pay Stamp Duty?

You must submit a Stamp Duty Land Tax return to HMRC and pay the required tax within 30 days of completing the purchase. Even if the price of your property falls below the Stamp Duty threshold, you must still submit a return to HMRC, even though you won’t be paying any Stamp Duty.

Usually, your solicitor, agent or conveyancer will file your return and deal with the payment for you, although you can do it yourself. However, if it isn’t all submitted on time, you can be charged a £100 penalty plus interest.

When is Stamp Duty not payable?

There are certain circumstances where you don’t have to pay Stamp Duty or file a return, including:

  • When no money or other payment has changed hands for a land or property transfer
  • When property is left to you in a will
  • When property is transferred because of divorce or dissolution of a civil partnership
  • When you buy a freehold property for less than £40,000
  • When you buy a new or assigned lease of 7 years or more, as long as the premium is less than £40,000 and the annual rent is less than £1,000
  • When you buy a new or assigned lease of less than 7 years, as long as the amount you pay is less than the residential or non-residential Stamp Duty threshold
  • When you use alternative property financial arrangements

Is one of your New Years’ resolutions to get onto the property ladder? Keep checking back to our resource centre for advice and tips to help you on your way.

The content published on this website is intended to provide information only. The reader should seek advice from experts on the subject matter and independently verify the accuracy and relevance of any information provided here before relying upon it or using it for any reason. You can view our terms and conditions here.

Want to read more?

  • First Time Buyer
  • Mortgage
  • Personal
  • Guide

Published: