You are here: Home - Mortgages - Buy To Let - Understanding -

60 second read…what is stamp duty?

Written by:
If you're buying a home in the UK, the likelihood is you'll have to pay stamp duty. Here's what you need to know about the tax.

Stamp duty – or stamp duty land tax, to give it its full name – is a tax you pay every time you buy a residential property.

Stamp duty is due on properties purchased in England, Northern Ireland and Wales (Scotland has its own system). It applies to both leasehold and freehold properties irrespective of whether you’re a cash buyer or you have a mortgage.

The amount of tax you pay is based on the purchase price of the house or flat. The starting threshold is £125,000. If you buy a property below this amount, you won’t have to pay any stamp duty.

The stamp duty bands are:

For homes up to £125,000 no stamp duty is payable then;

  • £125,001 to £250,000 – 2%
  • £250,001 to £925,000- 5%
  • £925,001 to £1,500,00- 10%
  • £1,500,001 and above 12%

The way stamp duty is calculated was overhauled in 2014. It used to be that you’d pay a rate based on the total property price. But that was replaced with a ‘layer’ system.

That means you only pay the tax rate on the part of the property which falls within the band.

Here’s an example:

If you buy a property for £255,000, you’d pay £2,750 – so that’s nothing on the first £125,000, 2% on £125,000-£250,000 and 5% on the remainder.

Second properties

As of April 2016, buyers of additional properties – including second homes and buy-to-lets – have to pay an extra 3% in stamp duty on any property costing more than £40,000.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week