With the publication of Kwasi Kwarteng’s mini-budget on 23rd September we’ve updated the financial numbers in this article:
Moving home, while an exciting prospect, involves a lot of thorough planning and financial commitment. Before embarking on the journey, you will need to be clued up on all aspects of the buying process – with stamp duty being one of them.
As the Stamp Duty Land Tax (SDLT) system has seen major changes in recent years, it’s important that home movers and first-time buyers are aware of the potential impacts this could have when purchasing a property.
With this in mind, here at Parkgate Estates we’ve outlined everything you’ll need to know about stamp duty.
What is stamp duty and who pays for it?
Stamp duty is a levy you pay to HM Revenue & Customs when purchasing a home, which is charged in bands.
In England and Northern Ireland, you’re liable to pay stamp duty when you buy a residential property or a piece of land costing more than £125,000. This tax applies to both freehold and leasehold properties, whether you’re buying outright or with a mortgage.
How much is stamp duty?
The rate you pay depends on what price threshold your property falls into and where the property is located.
As a buyer, you don’t pay stamp duty if you are purchasing a property worth less than £250,000. If you are buying a second home, then stamp duty – plus the additional stamp duty rate of 3% – is levied on properties up to £250,000 and zero is the total property price is up to £40,000.
When and how do you pay stamp duty?
The stamp duty return should be submitted and paid within 30 days of completing the purchase of your property.
While you can pay this yourself, it’s typically your solicitor who will deal with tax return and any payment due for you. Either way, you will need to ensure that it is submitted on time, as failure to do so could land you with a penalty charge.
If the price of your new home is under £125,000, you must still submit a return (unless exempt) even though you won’t need to pay any stamp duty.
Stamp duty for home movers and landlords
As a home mover, you won’t pay any stamp duty on the first £250,000 of a property purchase (updated 23/09/2022).
Homes worth £250,001 and £925,000 require 5%, while there is a 10% stamp duty charge for properties worth between £925,001 and £1.5 million. Anything above £1.5 million is taxed at 12%.
What’s more, since April 2016, landlords pay an extra 3% of stamp duty on the portion of the property up to £125,000 then 5%, 8%, 13% and 15% respectively for the price bands.
The table below shows the percentage of stamp duty that purchasers will be charged per threshold. This could also be used to work out the purchase price of the lease premium:
|Purchase price/lease premium or transaction value
|Buy-to-let/second home rate
|Up to £250,000
|£250,001 – £925,000
|£925,001 – £1.5m
Stamp duty tax relief for first-time buyers
In September 2022 Kwasi Kwarteng abolished stamp duty for first-time buyers purchasing a home costing up to £425,000. This updates the previous change in 2017 when the change went up to £300,000. The relief can be claimed for first-house purchases costing up to £625,000.
Standard rates for homes costing more than £500,000, however, will still apply. Since then, official records show that over 180,000 buyers have benefited from the tax relief, together saving an estimated £426 million.
The table below demonstrates the new stamp duty bands for first-time buyers:
|New stamp duty cost
|£0,000 – £425,000
|£425,001 – £625,000
While this may seem like quite a bit of information to absorb, our team at Parkgate Estates can assist you with stamp duty and all other aspects of the home moving process.
For more information on buying or selling a home in Richmond, Putney, Sheen and Mortlake, please get in touch with us on: 020 8940 2991.
Additionally, to find out how much your property could be worth on the current market, we offer an instant online valuations.
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