If you’ve ever bought a property before, then you might already be familiar with the concept of stamp duty. But if you’re a first-time buyer, then it might all be a bit of a mystery to you. Even if you heard about ‘stamp duty holidays’ during the pandemic, you probably didn’t pay attention if it didn’t apply to you. But it’s an important part of the property buying process, and something that a lot of buyers forget about when they’re saving for a deposit. And sadly, that’s cost a fair few a lot of money, or even their property in the process. So today we’re going to do a crash course on what stamp duty is, how it works, and what it means for you.
What Is Stamp Duty?
Stamp Duty, or Stamp Duty Land Tax to give it its full name, is a tax that’s applied to all legal documents relating to the purchase of any property or land in the UK. It applies to both residential and commercial properties and works on a tiered system based on price. So the more you pay for the property, the more SDLT you’ll pay as well.
Stamp duty is calculated for you by the government and is due to be paid in full 14 days after completion of your purchase. So it’s not something you can delay until your bank account recovers from the other buying costs! And if it’s your second property, or you’re buying in order to rent the property, you will face an even higher rate of stamp duty than the standard brackets.
Normally your conveyancer or solicitor will include the SDLT in the final costs they present to you, as well as file the SDLT return to HMRC on your behalf.
How Does Stamp Duty Work?
Because SDLT works on a tiered system, it can be a bit difficult to work out how much you’ll end up paying. Which isn’t great when you might need to save that extra for it. At the time of writing (2024), the SLDT rates for home movers are:
Up to £250,000: 0%
£250,002 to £925,000: 5%
£925,001 to £1.5 million: 10%
Over £1.5 million: 12%
The percentage is the percentage of the property price, which you’ll pay in SDLT. So if you buy a property for £600,000, your SDLT bill would be £17,500 – made up of 0% on the first £250,000 of the property, and then 5% on the remaining £350,000.
If It’s Your First Home
Before you get too worried, there is some good news for first-time buyers. The UK government runs a relief programme specifically for first-time buyers to help ease the burden of stamp duty and help them get onto the property ladder. So if you’re buying your first property, then your stamp duty bill will look more like this:
Up to £425,000: 0%
£425,001 to £625,000: 5%
If your property is over £625,000, then it doesn’t qualify for government relief, so you’ll be paying according to the standard rates above. But since the average price of a first home in the UK is between £264,000 and £431,160 depending on where you’re buying, you’ll probably be able to claim some SDLT, if not all of it.
What Impact Does Stamp Duty Have?
SDLT essentially adds yet another cost to the process of buying a property. That means you’ll need to add it in when you’re working out how much you need to save before you buy a property. Everyone knows you need to save for the deposit, but many people forget about all of the extras that you need to pay for as well. Things like:
Legal fees
Conveyancing
Surveys
Mortgage fees
Stamp duty
In other words, you need a bit more than a deposit to get you on the property ladder. Stamp Duty is by far the biggest extra expense in buying a home, since it can add several thousands of pounds to the bill. So our advice is simple. Figure out how much you need to save for a deposit, and then add 5-10K for stamp duty and extra costs.
If you have any questions about stamp duty, how to work it out or what it might mean for your property purchase, we are always happy to help. At Hudson Conveyancing we are experts in all stages of the home buying and selling process, which means we’re in the perfect position to give you advice and guidance when you need it. If your question is specifically about SDLT, then we recommend you get in touch with a SDLT specialist – we know a few if you need an introduction.
If you’d like to know more about the house buying process, just get in touch with us today and we’ll be happy to help.
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