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POSTED 05 April 2016 General

UK Stamp Duty Land Tax Rates Explained

The Stamp Duty Land Tax (or SDLT) is a charge that anyone buying a property over the value of £125,000 has to pay on the land. The Stamp Duty rates you pay are worked out using a tiered system depending on the value of your home. 

The rules apply mainly for those purchasing an additional home or those who have bought a home before things are a bit different for first-time buyers.

As of November 2017, new changes to the Stamp Duty tax mean those purchasing their first property under £500,000 receive a relief up to £300,000 and a fixed rate between £300,001 and £500,000. 

Here’s the basics of Stamp Duty explained:

What are the current Stamp Duty rates?

How much Stamp Duty you are required to pay is determined by the price of your home and whether you have a residential property or a buy-to-let home.

First-time buyers

As mentioned, first time buyers under the new lawyer pay no SDLT for properties under £300,000 and only 5% for any amount over that (between £300,001- £500,000). The relief however must be claimed via a land transaction return.

 Property/Transfer value Stamp Duty Tax rate
 < £125,000 0%
 £125,001 - £300,000 0%
 £300,001 - £500,000 5%
 £500,001+ Standard SDLT rates apply


Buying another home 

For home buyers buying their next residential property to live in, the different Stamp Duty thresholds are quite simple:

So for example if you purchased your next property worth £375,000, you would pay the following: 

  • First £125,000 at 0%
  • Next £125,000 at 2%which is £2,500
  • Final £125,000 at 5%which is £6,250

Meaning the total SDLT payable would be £8,750

It is a legal requirement that you pay your Stamp Duty tax within 30 days of buying a new property or you can be charged extra interest and even face a fine if you fail to pay.

stamp duty table 

Buy-to-let Properties

For those looking to purchase a buy-to-let property, as of April 2016, as a result of George Osborne’s announcements in the autumn budget, these rules apply:

All second homes and buy-to-let properties will have an additional 3% Stamp Duty Charge added. This is with the introduction of a new threshold, starting on homes above £40,000 in order to capture all buy-to-let transactions.

Calculating Stamp Duty tax

If you’re feeling confused about the amount of Stamp Duty you might have to pay on a new home, you can use our free Stamp Duty Calculator to easily find out the new figure.

Using the Stamp Duty calculator, UK home owners can look at how much the Stamp Duty is on a variation of different priced properties to get a good idea of the price range they’re looking at.

Stamp Duty rates can add a significant sum of money to the price of a new home, especially on buy-to-let properties, so it’s always beneficial to check this out before buying.

What if I want to buy a shared ownership property ?

If you’re looking to purchase a property via a shared ownerhsip scheme through an approved public body such as a local housing authority or housing association, you may still have to pay SDLT. In this case two choices are provided:

  • A one-off payment can be made (based on current market valuation of the property)
  • SDLT payments made in stages (based on the house share amount)

For example, if a property is valued at £250,000 and you purchase a 50% share under the shared ownership property scheme, a one-off payment of £2000 would be made (0% for the first £150,000 and £2000 at 2% for the remaining £100,000).

If paying in stages however, you will have to make a payment on the price paid for the lease (also known as the lease premium) if it is above the SDLT threshold. If it is below this threshold then no payment needs to be made, although a return is still required.

If the total rent amount is over £125,000 for the duration of the lease then there will be extra stamp duty land tax to pay (usually 1% over £125,000). 

When and if more shares are bought in the future, no additional SDLT needs to be paid unless you own over 80% of the property, wherein you pay the rate for any transactions leading to the 80% share and over that amount. 

Although the Stamp Duty rates on property can seem confusing at first, after reading this, hopefully they will all seem a little clearer. Don’t forget to use our Stamp Duty calculator to find out more for yourself.

Image courtesy of iStock