18 Sep 2023

Stamp Duty: 6 FAQs

If you’re planning to buy a property in the UK, you’ve probably come across the term “stamp duty”. Keep reading this frequently asked questions guide to learn more about what stamp duty is, how it is calculated, who pays it, and the payment process. 


What is stamp duty?

Stamp Duty Land Tax (SDLT), commonly referred to as “stamp duty”, is a tax imposed by the UK government on the purchase of either property or land. It is a payment that buyers must make when acquiring a property above a certain value. Keep reading to learn more about the property value tax thresholds.

How is stamp duty calculated?

Stamp duty is calculated based on the purchase price of a property. The tax is not a flat rate, but it is applied in a tiered manner which means you’ll pay different rates on different portions of the agreed property price. The stamp duty rates for residential properties are currently:

  • Up to £250,000 = 0%
  • £250,001 to £925,000 = 5%
  • £925,001 to £1.5 million = 10%
  • Over £1.5 million = 12%

Stamp duty rates do change based on government tax decisions. It is essential to check the latest rates with HM Revenue and Customs (HMRC) here.

Here’s how the calculation works:

Let’s say you’re purchasing a house for £300,000. The first £250,000 is taxed at 0%. The remaining £50,000 is taxed at 5%, which equals £2,500. So, in this example given, your total stamp duty would be £2,500.

It is important to note that there are alternative stamp duty rates for the following circumstances:

  • Purchasing an additional residential property: If you buy a second private residential home you will be asked to pay 3% on top of the stamp duty rates provided above.
  • Replacing your main residence: If the property you purchase is replacing your main residence you will not pay the extra 3%. However, if you have not completed the sale of your main residence on the day you complete the purchase of your new property, you will be required to pay the additional 3% stamp duty rate as you will own 2 properties. If you sell your original main residence within 36 months of completing the purchase of your second property, you can apply for a stamp duty refund. If the sale takes longer than 36 months, you may still be able to put an application in for a refund if you meet HMRC’s guidance.
  • New leasehold sales and transfers: If you buy a new residential leasehold property, you will pay stamp duty on the purchase price of the lease, also known as “lease premium”, based on the rates noted above. If the total rent over the life of the lease, referred to as the “net present value” is more than the £250,000 stamp duty threshold, you’ll be taxed 1% on the portion over £250,000. This does not apply to existing assigned leases.
  • A non-UK resident: In terms of stamp duty, the government classifies buyers as “not a UK resident” when they have not been present in the UK for at least 183 days (6 months) during the 12 months before purchasing a property. In this circumstance, you might pay a 2% surcharge, but you might not have to pay a surcharge on certain properties, transactions or if you are a particular buyer. It is best to check who is eligible for surcharge payment here.

Are there exemptions to who must pay stamp duty?

If you are purchasing property or land, there are different rates of stamp duty and in this answer, we will break down who might be eligible for relief or an exemption. If you are qualified for stamp duty relief, this might reduce the amount of tax you pay. You must complete an SDLT return to claim relief, even if there is no tax to be paid. A few examples of who might meet HMRC’s relief guidance.

  • First-time Buyers: If you are purchasing your first home you might be eligible for the HMRC relief scheme. First-time buyers are exempt from paying stamp duty on properties worth up to £425,000. 5% will be taxed on the portion of a property worth between £425,001 and £625,000. If the property you purchase is worth more than £625,000 you cannot claim relief and your SDLT calculation will be based on the tiered stamp duty rates as noted earlier in the blog.
  • Right to buy properties
  • Crown employees
  • View HMRC’s guidance for SDLT relief here.

In certain circumstances, you might find that you are exempt from paying stamp duty and in these instances, you do not need to file a return. An example of exemptions include:

  • No money or other payment changes hand for a land or property transfer
  • A property is left to you in a will
  • Property is transferred because of a divorce or dissolution of a civil partnership
  • You purchased a freehold property for less than £40,000
  • View HMRC’s guidance for all SDLT exemptions here.

When is stamp duty paid?

Stamp duty must be paid within 14 days of the completion of the property purchase. The “completion date” is the day you officially become the owner of the property, and it’s when the sale is legally finalised through your appointed solicitor or conveyancer.

What is the payment process?

In most cases, your solicitor or conveyancer will handle the stamp duty payment process on your behalf. They will ensure that the correct amount of stamp duty is calculated based on the purchase price and that is paid directly to HMRC within the 14-day payment window.

Your solicitor or conveyancer will also help you to complete a stamp duty land tax return, which includes details about the property and the amount of stamp duty due. This return is submitted to HMRC along with the stamp duty payment.  If you’re eligible for the relief scheme, mentioned earlier, your solicitor or conveyancer will apply for this relief on your behalf when submitting the stamp duty land tax return. This can result in a waived or reduced stamp duty amount.

After payment has been made, HMRC will provide a stamped certificate as proof of payment. This certificate is a crucial document that you should keep for your records.

It is best to agree with your solicitor or conveyancer, at the time you appoint them, that they handle the stamp duty land tax return and payment on your behalf.

If you take the task of filing your stamp duty return and paying the tax yourself, we recommend reading and following HMRC’s advice here.

What if you pay stamp duty late?

It’s crucial to meet the 14-day payment deadline for stamp duty to avoid penalties and interest charges. HMRC takes stamp duty compliance seriously, so it’s essential to stay on top of this aspect of your property purchase.

It is best to check for the latest stamp duty information on the HMRC website to ensure you are aware of the current regulations and obligations. If you are considering purchasing a home, view the latest properties for sale across East Kent here.