Buying a home is expensive enough without all the fees and taxes that are added on to the cost. On top of the solicitor’s fees, moving fees and estate agent fees is the dreaded Stamp Duty Land Tax. Any home buyer will tell you that this tax is one of their least favourites, especially given the time frame that it needs to be paid in.

What is Stamp Duty?

When you buy a property, the government taxes you, this is called the Stamp Duty Land Tax. The amount you will have to pay will depend on the value of the property, but whatever the cost, it will need to be paid within 14 days of the completion.

The rates are different if you are buying a second home or a buy-to-let property, and you will be charged a higher rate for these. In most cases if you’re a first-time buyer you will not be required to pay Stamp Duty.

How much do I pay?

This all depends on the value of the property. There are different rates for different values. If you’re property is worth less than £125,000, then great news, you don’t have to pay any Stamp Duty. But let’s be honest, that’s unlikely to be the case.

If your property is worth over £125,000, then you will be taxed 2% on everything from £125,001 to £250,000. On everything from £250,001 to £925,000, you will pay 5% and then from £925,001 to £1,500,000 it’ll be 10%. Finally, if your property is over £1,500,000, then you will pay 12% on everything from £1,500,001 and above.

As an example if you were to buy a property for £300,000, you’d be pay 0% on the first £125,000, then the second £125,000, you would be taxed 2% (£2,500) and then on the final £50,000, you would be taxed at 5% (£2,500), meaning the total you would pay is £5,000 in Stamp Duty.

If you’re a first-time buyer, then any property that you buy that you intend to live in that is priced at £300,000 or below will not be subject to Stamp Duty. If the property price is above £300,000 but below £500,000, then you will only pay Stamp Duty on the amount over £300,000. Should the property price be over £500,000, then you lose all first-time buyer benefits, meaning you must pay the full rate of Stamp Duty.

Buy-to-Let and second home Stamp Duty

Should the property be one which you intend to let out or have as a second home, then there will be different Stamp Duty rates applied to it. With these properties, you are required to pay 3% on the first £125,000, 5% on the second £125,000, 8% on everything from £250,001 to £925,000, 13% on amount from £925,001 to £1,500,000 and 15% for everything over £1,500,000.

If the £300,000 house from the example earlier was a buy-to-let property, then you would be paying 3% on the first £125,000 (£3,750), 5% on the second £125,000 (£6,250) and 8% on the final £50,000 (£4,000), meaning that you’d be paying a total of £14,000 in Stamp Duty for this property.

It’s important to note that if you’re in the process of selling your home, should you complete the buying of your next home, you will be charged the higher amount of Stamp Duty, and as long as the sale of your home occurs within 18 months of buying your new one, then you can reclaim the extra Stamp Duty you paid.

There are plenty of Stamp Duty calculators which you can use to help you work out what you’ll need to take into consideration when buying your next property. We can also put you in contact with financial services to help you understand how far your finances will stretch.