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‘Stamp duty’ – a simple guide

by | Feb 12, 2019 | Conveyancing, Stamp Duty

In our blog post ‘Moving home and conveyancing – a beginner’s guide’ , we outlined how your solicitor will be able to file your Stamp Duty Land Tax (SDLT) return and pay the tax to HM Revenue & Customs (HMRC) on your behalf, adding the amount to his or her fees. Many readers have asked us for more information about SDLT (commonly known as just ‘stamp duty’) and we’re naturally delighted to help.

SDLT is, after all, sometimes complex and potentially confusing. There are, for example, different rules depending on whether you have bought a home before or you are a first-time buyer. Just as importantly, SDLT can be very expensive. If you want to avoid an unpleasant surprise (and who doesn’t?), you should certainly work out your SDLT costs as soon as possible when you plan to buy a property.

In short, if you have bought a home before, you will have to pay SDLT if you buy a residential property costing over £125,000 in England or Northern Ireland.

If you are buying your first home, you can claim a discount (relief) so you don’t pay SDLT when buying a residential property costing up to £300,000.

For now, to avoid confusion, let’s focus on people who have bought a home before.

SDLT applies whether you are buying a freehold property; buying a new or existing leasehold; buying a property through a shared ownership scheme (run by an approved public body such as a local housing authority); or being transferred land or property in exchange for payment (for example, if you take on a mortgage or buy a share in a house).

The total value on which you pay SDLT is known as the ‘consideration’ and is normally the price you pay for the property. You pay at different rates on different portions of the property price, specifically:

  • On property costing up to £125,000, no SDLT needs to be paid;
  • The next £125,000 (being the portion from £125,001 to £250,000) carries an SDLT rate of 2%;
  • The next £675,000 (being the portion from £250,001 to £925,000) carries an SDLT rate of 5%;
  • The next £575,000 (being the portion from £925,001 to £1.5m) carries an SDLT rate of 10%, and;
  • Any remaining amount (being the portion above £1.5m) carries an SDLT rate of 12%.

Let’s imagine you are buying a freehold house in Chester, close to our lovely Cheshire office at Harthill (near Tattenhall), for £275,000. You would pay SDLT at 0% on the first £125,000, at 2% on the next £125,000 (being £2,500) and at 5% on the remaining £25,000 (being £1,250). Your SDLT payment would therefore total £3,750.

As with all legal matters, there are many complexities, exceptions and exemptions around SDLT. Access to top-class legal support can help ensure your dream move does not turn into a financial nightmare. Call us now at Deborah Wilkinson & Co. to find out more.