When purchasing a home, whether that is for the first time or as an experienced homeowner, Stamp Duty Land Tax (often called Stamp Duty or SDLT) is an important consideration that can have a significant impact on the overall cost of your transaction.

The rates and how they apply will depend on whether you are a first-time buyer or, if not, whether you will own more than one property once your purchase has completed.

This guide provides an overview of SDLT including when it is payable, the reliefs and exemptions that may be available and the different rates that can apply depending on your circumstances. While it may seem complex, understanding the basic principles can help you budget effectively and avoid unexpected costs during the conveyancing process.

Please note that SDLT rules can change and each transaction is different. This guide is intended as a general overview only and should not be relied upon as specific tax advice. If you are unsure how SDLT applies to your purchase, you should first discuss this with your conveyancer or if the situation is complex, seek the advice of an independent tax adviser.

When is Stamp Duty payable?

Stamp Duty becomes payable on the “effective date of the transaction” this is usually the date of completion of your purchase.

An SDLT Return must be submitted to HMRC and any SDLT due must be paid within 14 days of the effective date of the transaction. Failure to meet this deadline may result in interest or penalties being charged by HMRC.

In practice, your conveyancer will prepare the SDLT Return ahead of completion day for you to review and then, on completion day, will submit this to HMRC along with arranging payment of any liability. These funds are provided by you ahead of completion so, in most cases, it is not necessary to arrange a separate payment on completion day of any Stamp Duty Liability.

What is First Time Buyer Relief?

First Time Buyer Relief is a reduction in Stamp Duty available for first time buyers of property in England and Northern Ireland. In order to qualify for this relief, all purchasers of the property must not have owned or held an interest in any property either in the UK or abroad whether by purchase, inheritance, gift or otherwise.

Currently, First Time Buyer Relief means that you pay no SDLT on the first £300,000 and then 5% on the portion of £300,001 to £500,000. If the purchase price is over £500,000, First Time Buyer Relief is not available irrespective of the status of the purchasers and SDLT will be charged at the standard residential rates.

What are the Standard Residential Rates for previous homeowners?

For those who have previously owned or held an interest in property, the Standard Residential Rates are not as favourable as those for eligible for First Time Buyer Relief.

Currently, you pay no SDLT on the first £125,000 of the purchase price, 2% on the portion from £125,001 to £250,000 and 5% on the portion from £250,001 to £925,000.

The rates then increase to 10% for the value between £925,001 to £1.5 million and 12% for any portion above £1.5 million.

These rates apply if you are not a First Time Buyer (i.e. have owned or had an interest in property previously) and the property being purchased will be your only property and your main residence on completion.

What are the Higher Rates for additional properties and when do these apply?

The Higher Rates for Stamp Duty applies if you are buying a new residential property and this purchase means that you will own more than one residential property. Common examples include buying an investment property to rent out to a tenant.

The Higher Rates usually mean that you will pay an additional 5% on top of the Standard Residential Rates.

However, the additional SDLT can be refunded if your first property is sold within 36 months and you move into your new property as your main residence.

If you have not sold your main residence on completion day of your new purchase, you will have to pay the Higher Rate as you will own more than one property at the same time.

For example, Mr and Mrs Smith own and live in a house worth £300,000. They agree to purchase a new home for £450,000 but, they complete the purchase of the new property before their existing home has been sold.

On the day they complete their purchase, they own two residential properties. As a result, they must pay SDLT at the Higher Rates, including the additional 5% surcharge.

Six months later, their original home is sold. As they purchased the new property as a replacement for their main residence and sold their previous main residence within 36 months of the purchase, they can apply to HMRC for a refund of the additional 5% surcharge they paid.

By contrast, if Mr and Mrs Smith decided to keep their original home and rent it out, they would continue to own more than one property and would not be entitled to a refund of the Higher Rates SDLT.

Rates if you are not a UK Resident

If you have not been present in the UK for at least 6 months (183 days) during the 12 months before your purchase you are not considered to be a UK resident for Stamp Duty purposes.

This means that you will usually pay a 2% surcharge if you are purchasing a residential property.

The non-resident surcharge can be in addition to any other SDLT surcharges that are applicable to your matter.

For example, if you are a non UK resident for SDLT purposes and are purchasing a second property, the additional 2% can be charged in addition to the 5% Higher Rate outlined above.

If you have any questions in respect of buying your home and in dealing with Stamp Duty, please feel free to get in touch with our conveyancing team who will be happy to assist you further.