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How much stamp duty will I pay?

| Insurance

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 due when you purchase a property. However, the amount of stamp duty that you owe 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. With this in mind, whether you’re downsizing for retirement or purchasing your first home, 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.

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. Use the table below to see the percentage for each price bracket, and a couple of examples.

Purchase price

Stamp duty rate

Up to £125,000

0%

The next £125,000 (up to £250,000)

2%

The next £675,000 (up to £925,000)

5%

The next £575,000 (up to £1,500,000)

10%

Anything over £1,500,000.01

12%

Important information: Currently, stamp duty has been cut to 0% on properties up to £500,000 until 30th June 2021, so the above information will change and you will likely pay less stamp duty than expected, or even no tax at all.

Example 1

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. 

Example 2

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 £125,000. Therefore, you should subtract £125,000 from £300,000. This gives you £175,000.

You will pay 2% stamp duty on the next £125,000, which equals £2,500. Therefore, you will have paid nothing on the first £125,000, and 2% on the next £125,000. As you’re paying £300,000 for the property, the remaining £50,000 will have a 5%t stamp duty charge, coming to £2,500. This means that in total, you will pay £5,000 in stamp duty.

Stamp duty boundary

Percentage

Total to pay

Up to £125,000

0% of £125,000

£0

The next £125,000 (up to £250,000)

2% of £125,000

£2,500

The next £675,000 (up to £925,000)

5% of £50,000

£2,500

 

£300,000

£5,000

Example 3

If you’re buying a property for £300,000 and you are a first-time buyer, the amount you owe will be slightly different to the above example. This is because since 2017, first-time buyers don’t need to pay stamp duty up to £300,000. Therefore, the amount you owe would be zero.

When buying a house, it’s important to fully understand how much stamp duty you will need to pay, as well as making 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. Simply enter some information about the property, including whether it’s freehold or leasehold and residential or non-residential, if it’s the first property you’ve bought or not and whether it will be your main residence. 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, as seen in Example 2 above. When the property price goes above £500,000, you could even be looking at paying tens of thousands. This is a considerable amount of money, so what are some of the ways you can pay stamp duty?

  • Via your conveyancer

A conveyancer may be able to handle your stamp duty payment on your behalf. If, for instance, you have equity in the property you’re selling, this money can be used to cover costs such as solicitors fees and stamp duty.

For example, if your current mortgage stands at £125,000 but you manage to sell your home for £185,000, you have equity in the property amounting to £60,000. You may choose to use this money towards a deposit on the property you wish to purchase, but you may also be able to use some of this towards solicitors fees and stamp duty. In this case, the conveyancer will organise this for you and you don’t need to pay stamp duty separately.

  • Bank transfer

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, though do note that some branches may be closed during the COVID-19 pandemic, so it may be worth checking first. 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.

  • By Post

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 30 days of the completion date if you wish for the purchase to go through. If you choose to pay it using equity in your current property, it can be paid on the day of completion, however 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 cannot use your mortgage to pay stamp duty as this money is intended for the purchase of the property itself instead of tax. However, you may wish to discuss with your solicitor, bank or lender some further options. For instance, if you have a large cash deposit saved up, you may wish to borrow more from the bank and use this cash to pay your stamp duty, however the loan-to-value ratio will increase and you may end up paying more interest over the course of your mortgage.

*All information correct as of March 2021, however, some aspects could be subject to change.

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