What Is Stamp Duty and How Much Will It Cost?

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Stamp duty is a tax that is paid by those purchasing property in the UK. Stamp duty tax varies slightly by location. In England and Northern Ireland, this tax is named stamp duty land tax, while in Scotland it’s land and buildings transaction tax and in Wales, it’s land transaction tax.

The amount that each individual buyer has to pay depends on their circumstances and the overall cost of the property. Normally, those purchasing a buy to let property would need to pay 3% tax on anything under £125,000, 5% tax on a property worth £125,000 to £250,000, and 8% on a value of £250,000 to £925,000. The percentages change for buy to live purchases. For buy to live purchases (provided the buyer sells their previous home), a property worth less than £125,000 requires zero tax, while a value of £125,000 to £250,000 would call for a tax of 2%, and 5% tax for a value of between £250,000 to £925,000. Meanwhile, first-time buyers of a buy to live property are exempt from stamp duty tax on properties worth less than £300,000.

With these new UK stamp duty rules, those buying a residential property only need to pay stamp duty on properties with a value of over £500,000, while buy to let investors will pay 3% tax on a property up to the same value. On property purchases made between June and September 2021, residential purchases only require stamp duty tax on properties worth £250,000 or less, while a 3% tax will be implemented on buy to let purchases of the same price.

How Long Will the Stamp Duty Holiday Last?

The stamp duty holiday will now last until the end of June 2021 for the higher threshold and the end of September for the lower threshold. This leaves plenty of time for buyers to take advantage of the tax savings available. However, as we’ve seen since the stamp duty tax break was first announced, the new rules have caused a boom in property market activity. This means you may want to act sooner rather than later if you don’t want to lose out to another buyer on a particular property.

What Does This Mean For First-Time Buyers?

First-time buyers normally don’t need to pay stamp duty tax if their property is worth less than £300,000. Like other buy-to-live buyers, first-time buyers won’t need to pay any stamp duty tax on a property worth less than £500,000. This gives first-time buyers more leeway than usual in the type of property they can buy before paying tax.

To see the latest information for first time buyer stamp duty, be sure to check out our brand-new guide for 2021.

What About First Time Investors?

If you don’t already own your own home and are looking to purchase a buy to let property, you won’t need to pay any stamp duty tax on properties worth £500,000 or less from now until June 2021. This is a great option for investors who currently rent or live with family and are looking to make a buy to let investment as their first property purchase.

How Will the New Stamp Duty Holiday Impact Buy to Let?

A lot of buy to let investors are keen to find out how the new stamp duty cut will affect them and their upcoming investments. The good news is that buy to let investors are also able to make some significant savings depending on the price of the property they’re buying.

With past stamp duty tax rules, buy to let investors would need to pay 6% tax on a property worth £500,000 – that’s a tax of £30,000. With the rules under the stamp duty holiday, buy to let investors will now only pay 3% tax on a property of this value. This means that the stamp duty cut will result in savings of up to £15,000 for buy to let investors in the UK.

However, it’s worth keeping in mind that for those buying an off-plan property, these new tax rules will only apply to investors purchasing a property within a development that is due to complete before 30th June.

What Will Happen if I’ve Exchanged but Not Completed?

Those buying property only need to pay stamp duty tax once their purchase has completed. This means that if you exchanged before Wednesday 8th July 2020 but haven’t yet completed, you’ll still benefit from the new stamp duty cut.

What Happens if I Recently Completed and Have Not Yet Filed My Stamp Duty Return?

Unfortunately, those who have already completed on their purchase prior to 8th July will not be eligible for the new stamp duty holiday rules.

Is Stamp Duty Payable by Overseas Buyers?

Overseas buyers are still required to pay the same stamp duty costs as those living in the UK. This means that if you’re buying a property in the UK from overseas, you’re still able to save on stamp duty tax on purchases before the stamp duty holiday ends.

However, keep in mind that overseas residents buying residential property in England and Northern Ireland will be required to pay a 2% surcharge on top of stamp duty costs from April 2021.

What Does This Mean for Homeowners Looking to Sell?

Stamp duty doesn’t affect homeowners selling their property, as it only applies to those buying a new property.

Will This Help the Housing Market?

Since the stamp duty holiday was first announced, the UK property market has seen significant property price growth fuelled by a boost in market demand. Rightmove reported a 22% increase in traffic to their website immediately following the announcements of the tax break, and average UK house price growth hit record-breaking levels in 2020 with an annual growth rate of 8.5% by December. Extending the stamp duty tax holiday will help the UK housing market remain strong throughout 2021 and encourage even further market activity.

Disclaimer: This content was originally written in 2021. By the time you read it, some of the data used may have changed. 

For the latest on the UK property market, take a look at our updated Buy-to-Let Stamp Duty 2023 guide.