Who pays stamp duty?
If you want to buy a house, you have to take into account additional costs such as stamp duty.
You may not have to pay the tax and the thresholds vary depending on the value of the property.
Stamp duty can be a tricky subject, especially after the changes announced by the government in 2022.
We’ve put together an explanation to help you understand what the tax is, who pays it and how much you have to pay.
Here’s everything you need to know.
What is stamp duty?
STAMP duty land tax (SDLT) is a lump sum that anyone who purchases a property or plot of land above a certain price must pay.
You pay the tax if you:
- Buy a property on your own land
- Buy a new or existing leasehold
- Buy a property through a shared ownership scheme
- Land or real estate is transferred to you in exchange for payment. For example, you take out a mortgage or buy a share in a house
The rate you pay depends on the price and type of home and certain thresholds:
The current threshold values are:
- £250,000 for residential properties
- £425,000 for first-time buyers buying a property worth £625,000 or less
- £150,000 for non-residential land and properties
The SDLT rate you have to pay differs depending on whether it is a residential property, a second home or a buy to let property, and whether you are a first time buyer.
Who pays stamp duty now?
It is home buyers who pay the stamp duty, not the seller.
This is usually done on your behalf through a lawyer during the purchasing process.
As a home buyer, you have 14 days from the date of purchase of a property to file a Stamp Duty return with HMRC.
Failure to do so within this period may result in penalties and interest charges.
If you buy a property that exceeds the thresholds mentioned above, you will have to pay stamp duty.
How much stamp duty will I pay?
The amount of SDLT you have to pay depends on the price of the property you buy and the type of property it is.
There are also some exceptions regarding who must pay stamp duty.
If you are a first time buyer, no stamp duty is payable if the property is worth £425,000 or less.
You also get a discount if the purchase price is £625,000 or less and you only pay 5% SDLT on the portion between £425,001 and £625,000.
Those who are not first-time buyers pay different rates depending on the value of their new home:
- If it is up to £250,000, no stamp duty is paid
- The next £675,000 (the part from £250,001 to £925,000) will be charged 5% stamp duty
- The next £575,000 (the part from £925,001 to £1.5 million) will be charged 10% stamp duty
- The remaining amount (the portion above £1.5 million) will be charged 12% stamp duty
For example, if you buy a house worth €300,000, you will pay 5% stamp duty on the €50,000 – €2,500.
If you want to quickly calculate how much stamp duty you will pay on a property, you can use an online calculator.
Two useful ones can be found at www.moneyhelper.org.uk and www.stampdutycalculator.org.uk.
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