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Who needs to pay stamp duty?

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Stamp duty land tax, also more commonly referred to as simply stamp duty, is a type of tax that must be paid upon the purchase of a property. The amount that you pay is generally based on the purchase price and needs to be paid upon completion of the purchase. But who actually needs to pay stamp duty, and are there certain occasions when you could be exempt?

Do I have to pay stamp duty?

Whether you have to pay stamp duty, and indeed how much you have to pay, could differ depending on the number of homes you’ve previously owned, the cost of the house you’re purchasing and other factors, such as whether it’s a new build, shared ownership, etc. To find out whether you need to pay it based on your personal circumstances, keep reading. 

Who pays stamp duty, buyer or seller?

When purchasing a property, it is the buyer that is required to pay stamp duty, and not the seller. The seller will instead pay stamp duty on their onward purchase (if they’re also buying a property) as they themselves become a buyer. 

Do first time buyers have to pay stamp duty?

Before July 2020, first time buyers weren’t required to pay stamp duty provided the property they were purchasing cost less than £300,000.

However, on 8th July 2020, the government announced a stamp duty holiday across England and Northern Ireland which meant no one (first time buyer or otherwise) would pay stamp duty on homes purchased for less than £500,000. Currently, this rule is in place until 30th June 2021, however it has already been extended once*. From July, this will reduce to £300,000. 

For anyone purchasing a property over the price of £500,000 (or £300,000 from 1st July), stamp duty would need to be paid in full, whether you’re a first time buyer or you’ve owned a home before. To find out how much of this tax you need to pay, this stamp duty guide should help.

You are considered a first time buyer if this is your first home purchase and if it’s your only residence. This means that, if you’re a couple purchasing a home, for instance, it must be the first property either of you have bought. If one of you has bought a home in the past, you won’t be considered first time buyers, so do take this into account.

Do you pay stamp duty on a second home?

Thinking about buying a second home? There are separate stamp duty rules for this, too.

There are varying tax bands depending on the purchase price of the property. When purchasing a second home, each band increases by 3%, meaning you pay more stamp duty. For instance, if the previous band required you to pay 5% stamp duty on your only home, this would go up to 8% for your second one. This increase is in place for any property over £40,000, but excludes caravans, mobile homes and houseboats.

Purchase price

Stamp duty rate*

Rate for a second home*

Up to £125,000

0%

3%

The next £125,000 (up to £250,000)

2%

5%

The next £675,000 (up to £925,000)

5%

8%

The next £575,000 (up to £1,500,000)

10%

13%

Anything over £1,500,000.01

12%

15%

*Correct from October 2021

With the current stamp duty holiday in place until September 2021, the 3% increase is still applicable. For example, the tax for those purchasing their only residence for less than £250,000 would be £0. However, for those purchasing a second home, the rate would be 3%. You can find more information on the government website.

Do you pay stamp duty on a new build?

The same rules apply to new builds as to any other property, so whether you’re purchasing a brand new home or one that’s older, the stamp duty rate will remain the same. However, it is worth considering exactly how much stamp duty you have to pay.

Generally when buying a new build, you’re provided with the basic purchase price, however this will increase depending on the extras you choose. For instance, you might upgrade your kitchen finishes, tiles, security, electrics, lighting, fireplaces and more for an extra fee. This fee gets added to the price of the property, which can ultimately result in an increased stamp duty charge. 

Do you pay stamp duty on shared ownership?

The rules relating to stamp duty and shared ownership are slightly different again to if you were buying a property with full ownership.

The same tax thresholds apply when you purchase a shared ownership property, but there are a couple of ways in which you can pay it. In order to qualify for these ways of paying, you have to apply for a shared ownership lease through a qualifying body, such as local housing authority, housing association or housing action trust. This is because when a property is purchased in this way, the stamp duty is based on the share of the property and not the total cost.

Whereas stamp duty usually needs to be paid in full upon completion, along with your solicitors’ fees, you can choose to pay it in stages when purchasing a shared ownership building. First, you pay what’s due on the first sale amount but no further payments are required until you own at least 80% of the total property. Alternatively, you could choose to make a one-off payment. This is also known as a market value election. This figure is based on the total market value of the property and means you don’t need to pay any more stamp duty even if you purchase more shares in the building. 

*Information correct as of May 2021.

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