When Do You Pay Stamp Duty?

When Do You Pay Stamp Duty?

Are you considering the purchase of a property and wondering when you need to pay stamp duty? From understanding what stamp duty is to establishing when it needs to be paid, our guide will provide all the information you need when it comes to stamp duty.

What is stamp duty?

Stamp duty, also known as Stamp Duty Land Tax (SDLT) is a tax paid to HMRC that is included when purchasing a home in the UK. It’s a crucial part of the buying process that you must plan for and it’s important to know when you’ll need to pay stamp duty as it will have an impact on your overall buying costs.

At what point in the buying process do you pay stamp duty?

So, at what point in the buying process do you pay stamp duty? Generally, the payment of stamp duty is due within 14 days of the exchange of contracts. It’s essential to plan ahead as stamp duty can take some time to complete, and you should allow for this when setting their exchange date.

Once your exchange date has been set, it’s time to contact your solicitor or conveyancer and get your stamp duty sorted. They can handle all the paperwork and arrange for payment. They will be able to tell you the exact amount due for your purchase.

Ultimately, stamp duty needs to be taken into account at the beginning of the buying process. You will need to have the funds available to pay stamp duty at least two weeks before the exchange date. Make sure you liaise with your solicitor or conveyancer to ensure you don’t miss the payment deadline. 

Who pays stamp duty?

When it comes to purchasing land or property, the buyer is responsible for paying stamp duty. The amount payable will vary on your location and depend on the type of property you’re buying as well as the value of the purchase. 

Stamp duty for first-time buyers

Along with finding the perfect property and organising a mortgage, it’s important to understand the costs associated with buying your first home. One of the most important costs being stamp duty.

As a first-time buyer, you won’t need to pay stamp duty for property purchases up to £300,000 in England and Northern Ireland. For purchases above £300,000, first-time buyers pay a reduced rate of stamp duty in England and Wales (5% on the portion of the property value between £300,001 and £500,000). But in Northern Ireland, first-time buyers can still benefit from the zero-rate threshold, even if you’re buying a property worth more than £300,000. 

Stamp duty on second homes

When it comes to second-time homes, there are some changes to the amount of stamp duty owed. There is a lower stamp duty amount if you already own a property and are buying another. The second property will be subject to stamp duty if it's worth more than £40,000.

When you buy an additional property, you will also pay a higher percentage of stamp duty, also known as stamp duty surcharge. This is set at 3% in England and Northern Ireland and 4% in Scotland and Wales. 

What is considered a second home?

A second home is generally defined as any property that is not your main place of residence. For example, this can be a buy-to-let property, holiday home or a property that was gifted to you. 

How much is stamp duty?

The amount of stamp duty you'll need to pay can vary depending on a variety of factors, including the value of the property, your residency status, and whether you're a first-time buyer or a repeat buyer.

In England and Northern Ireland:

• Up to £250,000 - 0%

• £250,001 to £925,000 - 5%

• £925,001 to £1.5 million - 10%

• Above £1.5 million - 12%

In Wales

• Up to £225,000 - 0%

• £225,000 to £400,000 - 6%

• £400,000 to £750,000 - 7.5%

• £750,000 to £1.5 million - 10%

• Above £1.5 million - 12%

In Scotland

• Up to £145,000 - 0%

• £145,001 to £250,000 - 2%

• £250,001 to £325,000 - 5%

• £325,001 to £750,000 - 10%

• Above £750,000 - 12% 

Calculating stamp duty

Here's a general overview of how to calculate stamp duty yourself:

1. Determine the purchase price of the property

2. Find the relevant stamp duty rates based on the property price, including any surcharges

3. Apply the stamp duty tax rates to the relevant portions of the property price to calculate the total stamp duty owed

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