Here’s what you need to know about stamp duty

It’s an exciting time when you move home, but the process 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.

Since the Stamp Duty ‘holiday’ ended in September 2021, 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 £125,000. If you are buying a second home, then stamp duty – plus the additional stamp duty rate of 3% – is levied on properties worth over £40,000.

For first-time buyers, however, there is no stamp duty required on the first £300,000 for properties priced up to £500,000.

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.

From the 1st October 2021, 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 £125,000 of a property purchase.

However, there is a stamp duty rate of 2% on homes worth between £125,001 and £250,000. 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	Standard rate	Buy-to-let/second home rate
Up to £125,000	0%	3%
£125,000 – £250,001	2%	5%
£250,001 – £925,000	5%	8%
£925,001 – £1.5m	10%	13%
Over £1.5m	12%	15%

 

Stamp duty tax relief for first-time buyers

In November 2017’s Budget, Chancellor Philip Hammond abolished stamp duty for first-time buyers purchasing a home costing up to £300,000. This means that if you are a first-time buyer, you could potentially save up to £5,000.

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.

What’s more, as of October 2018, first-time buyers under shared ownership schemes are now able to claim first-time buyer stamp duty relief on homes worth up to £500,000. This change applies to homes purchased on or after November 22 2017. Eligible buyers who have not previously claimed first-time buyers’ relief will be able to claim a refund.

The table below demonstrates the new stamp duty bands for first-time buyers:

Property price	Old stamp duty cost	New stamp duty cost
£200,000	£1,500	£0
£300,000	£5,000	£0
£400,000	£10,000	£5,000
£500,000	£15,000	£10,000

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.

 

Keywords: Property, Buyers, Sellers, Estate Agents, Instant Online Valuation

Meta tags: Sellers, First-Time Buyers, Second Homes, Buyers, Stamp Duty Land Tax

Meta Description: Parkgate Estates outlines the most important facts on stamp duty for investors, first-time buyers and home movers.