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Stamp duty guide

When buying a home, paying your stamp duty is often the biggest expense aside from the property itself. It’s important to budget for this, because it can cost thousands — or even tens of thousands — depending on the value of the property.


It might seem confusing working out how stamp duty is calculated, who pays stamp duty, and even stamp duty is payable to — but for most purchases, it’s surprisingly straightforward.

When you can see past the jargon, it’s really not that complicated. Let’s strike on. 

What is stamp duty?

First things first — what is stamp duty? Stamp duty refers to the Stamp Duty Land Tax or SDLT. If you’re not familiar with the term, don’t worry. Most of us never encounter stamp duty until we go to buy our first homes. 

To put it simply, stamp duty is a tax paid on property and land in England and Northern Ireland.

In Scotland, it’s a different tax — known as the Land and Buildings Transaction Tax — and in Wales, there’s a Land Transaction Tax. They’re all different forms of transfer taxes when you purchase land or property. 

You can look at the government website for more information, but basically the more expensive the home, the more you pay in stamp duty. You may have to pay less if you’re a first-time buyer, but more if you own multiple homes — more on that later. 

Why is it called stamp duty? Well, back in the day Mr Joseph Stamp III bought the UK’s first home... just kidding. It’s called stamp duty because way, way back, there used to be actual stamps involved in transferring property. The name stuck. 

For first-time buyers, there's some good news."

How is stamp duty calculated?

Stamp duty is calculated based on the cost of the land or property. Normally you’ll only pay stamp duty if the price is more than £125,000 for residential properties or £150,000 for non-residential land and properties.  

Then things get complicated. 

How much stamp duty do you have to pay?

You can a quick and easy stamp duty calculator, but it basically breaks down like this:


Rate by property price

£0 - £125,000: 0%

£125,000.01 - £250,000: 2%

£250,000.01 - £925,000: 5%

£925,000.01 - £1,500,000: 10%

£1,500,000+: 12%

You can see why a stamp duty calculator comes in handy. 

You can end up paying an even higher rate if the property isn’t your main residence or you don’t plan on occupying the property (normally 3% over the normal rate) — but, for first-time buyers, there is some good news. 

Stamp duty for first time buyers

For first-time buyers, there is normally no stamp duty on the first £300,000 of the purchase price — as long as the property is valued at under £500,000. For most first-time buyers, that's a potential savings of £5,000. 

Not sure if it applies to you? Here’s what you need to know. 

What qualifies you as a first-time buyer?

To qualify as a first-time buyer, you must never have owned a home before — even if that home is abroad. You can’t have a stake of over £40,000 on any property, anywhere. If you’re buying with another person, both of you must be first-time buyers to qualify for the stamp duty relief. 

How does stamp duty relief work? 

If you’re purchasing your first home and the price is £500,000 or less, you qualify for stamp duty relief. That means no stamp duty on the first £300,000. But if the property is more than £500,000, you’ll be subject to standard stamp duty rates. Sorry. 

How does stamp duty work on a joint-owned property?

You can receive stamp duty relief if you’re buying with someone else, but it only works if you both are first-time buyers.

Are there ways you can pay that reduces the upfront cost?

Unfortunately, you can’t pay stamp duty in instalments — and it has to be paid within 14 days of the completed purchase, so you don’t have a lot of time. It’s crucial to budget for this expense. Some people try to get a mortgage for higher to cover the stamp duty— but it’s important that you don’t get into more debt than you can afford, so be sure to think carefully about the cost.  

Usually, your lawyer will take care of most of it for you, by filling out the SDLT return."

When to pay stamp duty

When is stamp duty payable? Well, pretty quickly. In estate agent jargon, stamp duty needs to be paid within 14 days of the ‘effective date’ of the transaction — which is normally the completion date. It’s your responsibility to let HMRC know about the tax you owe and you can face penalties and interest costs if you file or pay late. It pays to be prompt. 

How to pay stamp duty

If you’re worried about how to pay stamp duty, don’t fret too much. Usually, your lawyer will take care of most of it for you, by filling out the SDLT return. You can pay stamp duty online or you can choose to print out the paperwork and do it by hand, but chances are your solicitor will have covered any relevant information with you well in advance.

Even if there’s no stamp duty to pay, your solicitor will still need to complete the necessary paperwork. 

How does stamp duty on second homes work?

If you own multiple homes, you may be liable to pay a higher rate of stamp duty — only if you’re buying a second home. The higher rate of stamp duty doesn’t apply if you’re replacing the home you normally live in. 

You can use a stamp duty calculator to figure out how much stamp duty you pay on a second home, but it’s charged at 3% more than the traditional rate. When in doubt always, always talk to your solicitor or a tax expert. 

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Stamp duty FAQs

Yes and no. The amount you can borrow is normally dependent on the amount the bank thinks you can pay back. Sometimes you can borrow extra, but that doesn’t always mean it’s the right thing to do. Make sure you’re never borrowing more than is affordable and, if you have any questions, talk it over with an expert.