Buying a House > Conveyancing > SDLT

Stamp Duty, or Stamp Duty Land Tax (SDLT) as it’s officially called, is one of the final stages in the conveyancing process. And, all in all, one of the thorniest aspects of buying a house.

Once upon a time, it was a tax imposed on documents. This included, historically, the majority of legal documents, such as cheques, receipts, military commissions, marriage licenses and more. Nowadays, stamp duty (SDLT) is a tax on the transfer of property payable within 30 days of your completion date. SDLT can be an expensive source of confusion for buyers, a situation that hasn’t been helped by recent changes to legislation.

The amount you pay takes many factors into account, including:

  • your status as a buyer (e.g. first-time buyer, buying a second home, joint ownership with a partner)
  • whether the property is residential or non-residential / mixed-use
  • the location of the property (England and Northern Ireland, Scotland or Wales)
  • the value band that your property falls into

Whether you’re a first-time buyer or several rungs up the ladder, this quick primer is here to help you out. First up, we’re looking at the different SDLT rules for residential properties in England and Northern Ireland. Points of difference affecting Scotland and Wales, as well as commercial properties (non-residential and mixed-use), are covered in separate posts.

SDLT Standard Rate

What we refer to as the “standard rate” is the amount of stamp duty charged to non-first-time buyers. This is what you’ll pay if you’re already on the property ladder.

In England and Northern Ireland, you’re liable to pay Stamp Duty when you buy a residential property, or a piece of land, costing more than £125,000. This threshold falls to £40,000 if you’re buying a second home. This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage plan.

The Stamp Duty rates for freehold sales and transfers, and most leasehold properties, are currently:

Purchase price bands (£)Standard SDLT Rate (%)
Up to £125,0000%
£125,000 – £250,0002%
£250,000 – £925,0005%
£925,000 – £1,500,00010%
Above £1,500,00012%

It’s perfectly common for a property to span several bands. In this case, you pay different rates on different parts of your property. To illustrate this with a couple of examples:

For a property priced at £260,000 …

2% will be paid on £125,000 to £250,000 of the purchase price (£2500). 5% will be paid on the remaining £250,001 to £260,000 (£500). This gives us a total SDLT amount of £3000.

For a property valued at £940,000 …

2% will be paid on £125,000 – £250,000 (£2500), 5% on £250,000 – £925,000 (£33750) and 10% on £925,000 – £940,000 (£1500). This gives us a total SDLT amonut of £37,750.

SDLT for First-Time Buyers

Changes were recently made to stamp duty legislation to help out first-time buyers, the idea being to help more people onto the property ladder.

A first-time buyer is someone who has never owned a property (including inheritance). If you used to own a property but sold it, you are no longer a first-time buyer. Remember though that you can own commercial property and be considered a first-time buyer when it comes to buying a home.

As of 22nd November 2017, first-time buyers are exempt from Stamp Duty on properties up to £300,000, provided that the overall purchase does not exceed £500,000.

It may not seem like much, but those stamp duty savings may mean you can get your deposit together faster. Or lay down a larger deposit and, as a result, have smaller monthly mortgage repayments to contend with.

As a first-time buyer, you will pay 5% on the value of your property between £300,000 and £500,000. Properties over £500,000 do not qualify for first-time-buyer SDLT relief. For these properties, the SDLT you pay will be calculated according to the standard rate charged to non-first-time buyers. To give you a few examples:

First-Time Buyer on a £250,000 property

Congrats – you pay no SDLT because your purchase is under £300,000

First-Time Buyer on a £450,000 property

You pay 0% on the first £300,000 and 5% on the remaining £150,000 – giving us £7,500 in total stamp duty

First-Time Buyer on a £600,000 property

Unfortunately, you don’t qualify for stamp duty relief. But if your first step onto the ladder is more than half a million, then you’re probably doing OK for yourself!

If you’re a first-time buyer, there’s nothing in particular you need to do to qualify for SDLT relief. Your conveyancing solicitor will take care of the paperwork for you. Here’s a summary of the criteria they will check for:

  • You are a first-time buyer (if it’s a joint purchase, both partners must be first-time buyers)
  • You are buying a home that you will live in
  • Your property is below £300,000 (for no Stamp Duty at all)
  • It is under £500,000 (if so, you will only pay Stamp Duty on the amount over £300,000)
  • It is not located in Scotland or Wales, where rules are slightly different (we cover these separately)

A Note on SDLT on London House Moves

The capital is notorious for its stratospheric house prices. And, unfortunately, London does not have its own adjusted bands for stamp duty. The average price paid by first-time buyers in the UK is £208,000, but this rises to £410,000 in London. So, the average first-time buyer outside London escapes SDLT entirely. While the average buyer in London does not.

But, while first-time buyers in London will likely be buying over the SDLT-free threshold, they will still only pay 5% on the value of their property between £300,000 and £500,000 (as opposed to the standard 5% between £125,000 and £500,000.

SDLT: Buy-to-Let Properties and Second Homes

The main distinction with stamp duty is between people moving along the housing ladder and people getting onto the ladder for the first time. But there are different rules again for people purchasing additional properties like second homes and buy-to-let.

From April 1st 2016, anyone buying an additional residential property, such as buy-to-lets, second homes or holiday cottages, must pay an extra 3% on top of existing SDLT, provided the additional property (or their share of it) is above £40,000. These rule changes are sometimes called Higher Rates on Additional Dwellings (HRAD).

Purchase price bands (£)Standard SDLT Rate (%)Second Property Rate (%)
£40,000 – £125,0000%3%
£125,001 – £250,0002%5%
£250,001 – £925,0005%8%
£925,001 – £1,500,00010%13%
Above £1,500,00012%15%

You don’t need to pay the higher rates if you’re purchasing a caravan, a mobile home or a houseboat, and if the total property value is under £40,000, you will also not be required to pay any SDLT.

It’s not always possible to sell your existing home before buying a new one – and in these cases you are treated as buying a second home with the 3% surcharge. However, you can reclaim this surcharge when you get round to selling – or giving away – your original property, provided this is within three years of purchasing the new one.

You can claim the refund within three months of selling your original property, or within 12 months of filing your SDLT tax return (whichever comes later). Apply both online and by paper form here.

Exemptions from Stamp Duty

Depending on the value of your property, you may qualify for full stamp duty exemption under the standard SDLT rate, the first-time buyers rate or the rate for HRAD rate for additional properties. However, there are other circumstances where Stamp Duty is either not payable or can be reduced. These are listed below:

  • Slightly over rate band – if the price is only just within a higher band, ask the seller or estate agent if they would accept a slightly lower price
  • Transfer of property in separation or divorce – if you’re divorcing or separating from your spouse or partner, there’s no Stamp Duty to pay if you transfer a proportion of your home’s value to them
  • Transfer of deeds – if you transfer your title deeds to someone else – either as a gift or in your will – they won’t have to pay Stamp Duty on the market value of the property
  • Inheritance – you don’t have to pay SDLT if a property is left to you in a will
  • Houseboat – only properties that use land space are taxable under SDLT

However, if you exchange properties with another person, you will each have to pay Stamp Duty on the property you receive based on its market value.

Stamp Duty and Joint Ownership

The basic principles of SDLT are straightforward – but there are always going to be situations that require a bit more explanation. One of these is joint ownership – where one person could be a first-time buyer and the other not.

If you are married and jointly buying a property, then you both need to be eligible first-time buyers to get First-Time Buyers Stamp Duty relief. Otherwise standard rates apply.

Unmarried couples can still get a reduction in Stamp Duty, but that is only if the person named on the mortgage deed is a first-time buyer.

Remember though: if the mortgage application is only in one name, it will be based on that person’s income alone. And this might impact how much your lender is prepared to lend you. You will also need to think about what would happen if you parted ways. You would both have a claim if the property is in both names. However, if the property is only in one name, then it’s possible you or your partner could be left with nothing legally.

How do you pay Stamp Duty?

Don’t worry, your solicitor or conveyancer will deal with the paperwork accompanying your SDLT return.

Generally, they will submit your return and pay the amount due on the date of completion – either adding the amount to their fees or (more commonly) collecting the amount from you in advance. Legally, stamp duty must be paid within 30 days of completion – if not, you may be subject to a fine.

Note: even if you’re exempt from paying stamp duty, you still need to submit a tax return to HM Revenue & Customs within the one-month time limit. Also, you cannot register a change in ownership of land without the Certificate provided by HM Revenue & Customs following the acceptance of an SDLT return.

If you prefer, you can always take things into your own hands by opting for the DIY-conveyancing route. However, conveyancing is fraught with potential issues, so is best left to the professionals in the majority of cases.

Future of Stamp Duty

Stamp duty has evolved substantially over the years. However, there don’t appear to be any new SDLT reforms on the horizon currently.

Despite – or perhaps because of – recent amendments to SDLT legislation, people haven’t stopped calling for change. Some argue that anyone downsizing should be exempt, while even Boris Johnson believes that stamp duty should be slashed further than it has been already.

Others think that the additional 3% SDLT charged to landlords since 2016 is not having its desired effect of curbing house-price growth. They argue that, instead, all that is happening is that surcharges are being indirectly passed on to tenants, making life even tougher for renters than it is already.

That’s all on SDLT for now – stay tuned for our follow up posts exploring Stamp Duty in Scotland and Wales and Stamp Duty on Mixed-Use and Non-Residential Property.