How much stamp duty will I pay?
6 minute read
Stamp duty, also known as ‘land and buildings transaction tax’ in Scotland and ‘land transaction tax’ in Wales, is a type of tax that is paid when you purchase a property. However, the amount of stamp duty that is payable will depend on the price of the property you’re buying, as well as how many properties you own. This can make calculating stamp duty confusing. Use the guide below to find out exactly how much stamp duty you’re required to pay, as well as how you can pay it.
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What is the stamp duty rate?
The total stamp duty you will have to pay is based on a percentage of the cost of the property you’re buying. This is why the stamp duty rate can differ from purchase to purchase. To find the tax rules for the type of property you’re purchasing, you can use the government website.
To help contextualise these figures, try using the table below to see the percentage for each price bracket and some example scenarios.
Stamp duty rate
On the first £250,000
The next £675,000 (£250,0001 to £925,000)
The next £575,000 (£925,001 to £1.5 million)
The remaining amount (£1.5 million and above)
If you’re buying a property for £100,000 and it will be your only property but you’ve bought and sold houses in the past (i.e. you’re not a first-time buyer), you won’t pay any stamp duty. This is because stamp duty is 0% up to £125,000.
If you’re buying a property for £300,000 and you’re not a first-time buyer, you will pay a stamp duty rate of 5%. However, you don’t need to pay 5% of the full £300,000. This is because you don’t pay stamp duty on the first £250,000. Therefore, you should subtract £250,000 from £300,000. This gives you £50,000.
Therefore the stamp duty will be 5% of £50,000, coming to £2,500.
First time buyers
If you’re buying a property and you are a first-time buyer, the amount you owe will be slightly different to the above example.
First-time buyers pay no stamp duty on the initial £425,000, if the property is worth £625,000 or less. For a home worth more, the payment threshold will be £250,000.
You are a first-time buyer and you’re purchasing a home worth £500,000. Therefore, the stamp duty will be calculated as:
- 0% on the first £425,000 = £0
- 5% on the remaining £75,000 = £3,750
However, if you are buying a property worth £700,000 as your first home, the rates will change to:
- 0% on the first £250,000 = £0
- 5% on the remaining £450,000 = £22,500
When buying a house, it’s important to fully understand how much stamp duty you will need to pay, as well as make sure you can afford the solicitor’s fees and extra costs such as home insurance, life insurance, etc.
To calculate how much stamp duty you’ll pay on a property you’re purchasing, you can use the government’s stamp duty calculator. This will have the most up-to-date information should you need it.
How to pay stamp duty
Stamp duty can quickly add up to thousands of pounds, so what are some of the ways you can pay stamp duty?
Via your conveyancer
A solicitor or conveyancer will usually manage stamp duty on your behalf. They will calculate the fee required and collect the money from you in advance. Then, on completion day, they will pay the stamp duty.
You can transfer the full amount directly to HMRC. In order to do this, you may need a Unique Transaction Reference Number (UTRN) which can be found on your SDLT5 certificate (this should have previously been supplied by your solicitor or conveyancer). Faster Payments will reach HMRC on the same or next day, whereas Bacs can take up to three working days.
At the bank
You can go directly to the bank to pay your stamp duty. You can use a cheque or cash to make the payment, and again you will need your UTRN number. Cheques can take up to three working days to clear.
You can send a cheque directly in the post to HMRC. This may be a good option if your local bank is shut or has limited opening hours. The cheque should be payable to ‘HM Revenue and Customs only’ and your UTRN number should be included on the reverse of your cheque. You should allow a few days for the cheque to reach HMRC and then there may be a delay while your cheque is being processed.
Can stamp duty be paid in instalments?
Stamp duty cannot be paid in instalments - it must be paid in full within 14 days of the completion date, if you wish for the purchase to go through. Do keep in mind that if you wish to pay it online, via cheque or by post, you must allow a few working days for the payment to go through.
Can you add stamp duty to your mortgage?
You can use your mortgage to pay stamp duty.
However, you need to remember that adding the expense to your mortgage will mean paying interest. And, as you'll need to borrow a larger amount of money, the loan-to-value ratio will increase and you may end up paying a higher interest rate over the course of your mortgage.
If you still wish to proceed with this option, talk to your solicitor or conveyancer. They will help arrange this for you.
*All information correct as of August 2023, however, some aspects could be subject to change.