Stamp duty explained

by Leeds Building Society

Warning: THE MORTGAGED PROPERTY (WHICH MAY BE YOUR HOME) MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Stamp duty land tax (normally called stamp duty, or SDLT) is an additional tax you have to pay when you buy a property above a set price threshold.

Here's how it works:

(If you're a buy to let landlord looking to find out more about stamp duty on additional properties, take a look at our article "Buy to let tax changes: what you need to know". Rates for additional properties are different, so some of the information in this article may not be relevant for you.)

What is stamp duty?

Stamp duty is one of the costs and fees you need to consider when saving up for your home.

Stamp duty is a tax you pay when you buy a property for more than £125,000. Properties where the market value is less than £125,000 are currently exempt from stamp duty.

As long as the property costs more than £125,000, stamp duty applies regardless of the way you buy the property. So whether you're buying with cash or getting a mortgage, stamp duty still applies.

You pay stamp duty on both freehold and leasehold properties.

Stamp duty doesn't apply in Scotland. Instead, you pay Land and Buildings Transaction Tax. Different rates and guidance apply, so make sure you get specific advice for Scotland if that's where you're buying.

How much do I have to pay for stamp duty?

There are different "bands" for paying stamp duty, depending on the cost of the property.

Stamp duty can be changed by the government at any time, so double-check that you've got up-to-date information when working out the full costs of buying a home.

The current stamp duty rates are:

Property priceStamp duty rate
£0-£125,000 0%
£125,001-£250,000 2%
£250,001-£925,000 5%
£925,001-£1.5m 10%
£1.5m+ 12%

Stamp duty is only calculated on the part of the purchase price that falls within that band - not the whole thing.

So if you buy a property for £125,001, you'll only have to pay the tax on 2% of £1. This is because you're only £1 over the threshold for paying stamp duty.

Things get slightly more complicated as you work through the bands. For example, let's say you buy a house for £950,000. You will pay:

  • 0% tax on the first £125,000.
  • 2% tax on the next £125,000.
  • 5% on the next £675,000.
  • 10% on the next £25,000.

So that's:

  • £2,500, plus
  • £33,750, plus
  • £2,500 - meaning a total stamp duty charge of £38,750.

Exemptions from stamp duty

Stamp duty isn't applied if the property is:

  • A gift, or left to you in a Will
  • Being transferred as part of a divorce or separation

(Other taxes might apply, too. It's worth speaking to a Financial Advisor about tax to find out exactly what you'll need to pay.)

If you buy a Shared Ownership home, you only have to pay stamp duty on the portion of the property you're buying. So if you buy 50% of a £200,000 house, you won't have to pay any stamp duty.

Since 2012, first time buyers have to pay stamp duty in full. Between 2010 and 2012, first time buyers only paid stamp duty on properties worth more than £250,000.

Paying your stamp duty

You have to pay stamp duty within 30 days of finalising the purchase of the property. To do this, you need to submit a Stamp Duty Land Tax return.

Usually your solicitor will take care of this, but it's worth double-checking that this is the case.

If it's not submitted within 30 days, HMRC may add interest to the payment and a late payment penalty.

This guide is intended as a summary only and does not constitute legal or financial advice from Leeds Building Society. No reliance should be placed on this guide. We recommend you seek independent financial and/or legal advice if you have any questions.