Stamp duty may be something you will need to budget for when you buy a new home, but what actually is stamp duty? We’ve created this guide to help you understand what it is, who has to pay stamp duty, how much stamp duty rates are and how you pay it.
What is stamp duty?
Stamp duty is a tax you pay when you buy a home. It is the buyer who is responsible for paying for stamp duty and not the seller. Stamp duty from the 23rd September 2022 in England was changed. You will now not need to pay any stamp duty on the first £250,000 of your home. However, not all buyers will have to pay stamp duty. For example if you are a first time buyer, you will only pay stamp duty if your home is worth £425,000 or more.
How much is stamp duty?
The amount you will pay in stamp duty depends on:
- How much you’re buying the home for
- If it is the only property you own
- Where in the UK you are buying the home
Stamp duty rates
These are the stamp duty rates in England and Northern Ireland after the 23rd September 2022, taken from the GOV.UK website.
In Scotland stamp duty has another name which is Land and Buildings Transaction Tax. Below is the rates in Scotland for 2022-23, taken from the Scottish Government website.
In Wales stamp duty is called Land Transaction Tax. On the 27th September 2022 the Welsh government changed the rates. The new rates are below and came into effect on the 10th October 2022. You can find out more about this on the Welsh Government website.
Stamp duty on a second home
If you are buying a second home you will have to pay an extra 3% stamp duty on top of standard rates, if the home is worth more than £40,000. This does not apply if you have brought a caravan, houseboat or mobile home.
If you have bought a new home, but not sold your previous home yet then you may have to pay a second home rate for a while, until your old home is sold. If you are unable to sell your old home you will own two properties. Therefore, you will have to pay the additional stamp duty rate.
However, if within three years of buying your new home you can manage to sell your old home, then you should be able to get a refund for the amount of money you paid at a higher rate. To be able to get this refund you must apply to HMRC. You will need to claim within 12 months of completing your stamp duty tax return or within 12 months of selling your previous home.
First time buyer stamp duty rules
If you are a first time buyer and your home costs up to £625,000 then no stamp duty will need to be paid on the first £425,000. On the remaining amount you will need to pay the rate of 5%. However, if you are first time buyer and your home cost more than £625,000 then you will have to pay the usual rate as per the above tables.
How and when do I pay stamp duty?
You will need to file a stamp duty land tax return and pay within 14 days. It is important you do it within 14 days otherwise HMRC can give you a penalty for not doing it on time. If you have hired a conveyancer then they should be able to sort out your stamp duty for you, but if you haven’t hired a conveyancer it is your responsibility so you must make sure you do it.
In addition, if you are looking to hire a conveyancer and need help choosing then take a look at our blog post to find out “What you need to know before choosing a conveyancer”.
What are the exemptions for not paying stamp duty?
- If a home was to be transferred during a divorce or separation then stamp duty will be exempt.
- If the home is given to you as a gift then you won’t need to pay.
- If a home is left to you in a will then you may be exempt.
Hopefully this guide has helped you to understand more about stamp duty, from what it is and how to apply. The things you need to remember from this guide if you are buying a home are:
- you now don’t pay stamp duty tax on the first £250,000 of your home
- You may be eligible for first time buyer rates
- You must pay within 14 days
- Rates differ compared to where you live in the UK