Stamp duty is a tax that you pay when buying a property in England and Northern Ireland. In Scotland and Wales there is a similar tax called Land Transaction Tax (LTT).
The amount you pay depends on your circumstances and the price of the property. This guide will cover how stamp duty is paid and the exemptions, remissions and reliefs.
Paying Stamp Duty
Stamp Duty (or Land and Buildings Transaction Tax in Wales and Scotland) is the fee you’re liable to pay when buying property in England, Northern Ireland or Wales. It’s a lump sum that is adjusted depending on the price and type of property purchased saw on Twitter. It’s a requirement for all freehold purchases and leasehold purchases that are financed by mortgage, shared ownership schemes or by cash and is payable on the written instruments that transfer ownership of land and buildings.
Historically, the original documents would need to be taken to a local office to have a physical stamp applied to them. However, this is no longer the case and nowadays it’s all done electronically. HM Revenue & Customs (HMRC) is informed by email that stamp duty has been paid and will receive a scan of the document that the stamp was attached to. If payment isn’t received within 14 days of the completion date, interest charges will apply.
There are a variety of exemptions from stamp duty and this can help reduce the overall cost of purchasing your new home. You may be eligible for an exemption if you’re a first time buyer, buying a second property or a buy-to-let, or if the property you’re purchasing is mobile, such as a caravan or a houseboat. There are also a number of financial options available for helping people onto the property ladder, including Lifetime Individual Savings Accounts and the Help to Buy ISA.
Exemptions
Stamp duty (England and Northern Ireland), LBTT (Scotland) or LTT (Wales) is a tax you pay on the written documents that transfer ownership of land and buildings over a certain value. It is usually payable on a freehold purchase of property and land, but can also be paid on a leasehold purchase, a shared ownership scheme or if the transferred property is cash (not a mortgage).
If you are buying your first home in England and/or Wales, there are exemptions from stamp duty. You will have to meet specific qualifying criteria over a period of time before you can claim the exemption.
In Scotland, there are also several financing options designed to help people get on the property ladder. These include Lifetime Individual Savings Accounts (also known as LISAs) and the Help to Buy ISA.
Anyone who buys additional Scottish or Welsh property costing more than PS40,000, including landlords and second-home owners, pays an extra 4% on top of the standard rates.
The government announced changes to stamp duty on 23 September 2022 aimed at helping more people onto the property ladder. These were included in a’stand alone’ Bill and were approved by the House of Commons. See the library briefing on the Stamp Duty Land Tax (Reduction) Bill 2022-23 for more information.
Remissions
Stamp duty is paid on the transfer of property ownership and is a tax levied on residential and non-residential property in England, Northern Ireland, Wales and Scotland. The rates vary with the value of the property being purchased. Buyers pay this tax whether buying the property outright or with a mortgage.
Generally, first time buyers are eligible for some kind of rebate or relief to reduce the amount of stamp duty payable. These are usually offered via a government scheme to help those looking to get on the property ladder. This includes the Lifetime Individual Savings Account and the Help to Buy ISA.
In addition, buyers of new build properties may be able to reclaim the VAT on their stamp duty payments. This is often a significant rebate which can significantly reduce the overall costs of buying a new home.
Those who are purchasing second homes or buy-to-let properties in England and Northern Ireland have to pay an extra 3% above the normal rate. This is known as the additional dwelling supplement and has been in place since April 2016.
In Wales, a similar surcharge is levied on those purchasing second properties which is known as land and buildings transaction tax (LBTT). However, like LSTD in England, LBTT has a reduced rate for those buying their first home.
Reliefs
There are a variety of exemptions and reliefs from stamp duty, depending on your circumstances. Generally, these depend on the value of the property, whether you are a first-time buyer and where the property is located. The Chancellor occasionally offers a stamp duty holiday to try to stimulate the housing market. This is usually done during times of economic uncertainty, when the rate of stamp duty drops to below what would otherwise be the normal level. This can be applied to homes purchased for private use as well as those bought for rental.
If you are purchasing a property in Scotland, the rules are slightly different. Here, the tax is called Land and Buildings Transaction Tax (LBTT). LBTT applies to both residential and commercial properties that are priced over a certain threshold.
It is important to understand the rules around stamp duty before buying a property in the UK. The amount you are expected to pay will vary, and you must submit a return to HMRC within 30 days of completion or face penalties. Your solicitor or conveyancer will handle the process for you, but it is your responsibility to make sure the correct payments are made on time. There are also other taxes that may apply to your purchase, including VAT and other local rates. This is why it’s best to seek expert advice from a reputable solicitor before you buy.
