If you purchase a residential property in England or Wales and pay more than £125,000 you must pay Stamp Duty Land Tax (SDLT).
The levy is based on the price you pay for the property and other payments, such as fixtures and fittings, the release of a debt or the transfer of an outstanding mortgage.
Normal Stamp Duty Rates
If, on completion of your purchase, you will only own one property or you are purchasing the property to replace your main residence, the following SDLT rates will apply on the consideration:
| Up to £125,000 | 0% |
|---|---|
| From £125,001 to £250,000 | 2% |
| From £250,001 to £925,000 | 5% |
| From £925,001 to £1,500,000 | 10% |
| £1,500,001 + | 12% |
As an example, if you were to purchase a property for £350,000 the total Stamp Duty payable would be £7,500 calculated as follows:
- Up to £125,000 at 0% = 0
- £125,001 to £250,000 at 2% = £2,500
- £250,001 to £925,000 at 5% = £5,500
Stamp Duty for Second Properties
In the Government’s 2015 Autumn Statement it was announced that, with effect from 1 April 2016, people purchasing second properties (such as buy-to-lets or holiday homes) will pay an extra 3% per band in SDLT. The new rates are thus as follows:
| Less than £40,000 | 0% |
|---|---|
| 0 to £125,000 (providing the consideration exceeds £40,000 | 3% |
| From £125,001 to £250,000 | 5% |
| From £250,001 to £925,000 | 8% |
| From £925,001 to £1,500,000 | 13% |
| £1,500,001 + | 15% |
If you were to purchase the same property as above for £350,000 but as an investment, the total Stamp Duty due would be £18,000 (an additional £10,500), calculated as follows:
- Up to 125,000 at 3% (£125,000) = £3,750
- £125,000 to £250,000 at 5%(£125,000) = £6,250
- £250,001 to £925,000 at 8% (£100,000) = £8,000
Why Do We Pay Stamp Duty?
The Government is committed to supporting home ownership and it was announced that the money raised from tax on people buying their second home would be used to help those struggling to buy their first home. This included a plan focused on low-cost home ownership to:
- deliver 400,000 affordable housing starts by 2020-21
- extend the Right to Buy to Housing Association tenants
- accelerate housing supply and get more homes built
- extend the Help to Buy: Equity Loan scheme to 2021 and create a London Help to Buy scheme, offering a 40% equity loan
If you would like us to help you calculate your Stamp Duty Land Tax liability or would like to chat about your conveyancing, please give us a call on 01273 407 970.
