What is Stamp Duty?

Estimated reading time 5 minutes

Among all the other terms you may hear when you are involved in a property transaction, stamp duty is perhaps one of the most common. It is in the news frequently and it can often be quite confusing knowing whether you have to pay it and if you do, how much.

At Gaffsy, we understand this confusion. As one of the leading cash house buyers in the UK, it is a topic we are asked about countless times during the day. To ease the confusion and to lay out exactly what stamp duty is, we thought a quick guide would help.

So, what is stamp duty?

In simple terms, stamp duty or SDLT is a tax that is paid when you are purchasing a property. The amount you pay depends on the value of the property and where you are on the property ladder. For example, first-time buyers have different rules around stamp duty to second steppers. Likewise, stamp duty for inherited property is also a little different.

What is the stamp duty threshold?

Recent announcements by the Government changed the threshold on stamp duty. It is hoped that this will help the property market and in turn the economy. We have gone into great depth about the stamp duty changes in another feature, but below, we will show you how the rates are currently looking.

Property Value Stamp Duty (SDLT) rate
Up to £250,000 Zero
£250,001-£925,000 5%
£925,001-£1.5m 10%
The remaining value after £1.5m 12%

The above rates are for residential property. Should you be investing in commercial buildings instead, the rates are a little different.

Property Value Stamp Duty rate
Up to £150,000 Zero
£150,001-£250,000 2%
The remaining value after £250,000 5%

What is stamp duty for first-time buyers?

As we mentioned earlier, there are differing rates on stamp duty depending on where you are on the property ladder and in order to give the market a boost.

The present rates for first-time buyers mean that a house can be purchased for up to £425,000 by a first-time buyer and have no stamp duty. Anything above £425,000 up to £625,000 will incur a 5% SDLT.

What is the stamp duty charge for a second home?

If you are in a position where you are looking to buy an additional property, the rates are again a little different. In most cases, the amount of stamp duty you pay on a second home will be 3% on top of the typical rate for the property value.

However, if you are looking to sell your other property, you are able to claim back the additional 3% as long as it sells within 36 months of you buying the second home. If the house sells after this time period, you would be required to contact HMRC to apply for the refund, explaining why the sale took so much longer.

What is non UK resident stamp duty?

In some cases, people who reside abroad may wish to buy property in the UK. You could still be a British citizen but be working in a foreign country perhaps, and would like a home for when you are in the country.

If you spend less than 6 months in the UK, you will not be classed as a UK resident in stamp duty terms. This means that you will pay a 2% surcharge on the property you are buying. However, there are certain exemptions and it is advisable to check the government guidelines on whether you qualify for those.

If you do not, not only will the surcharge be applied but the rates will be calculated depending on your status as a buyer – for example, first-time buyers or someone buying an additional property.

How long do I have to pay stamp duty?

You must pay your stamp duty within 14 days, a decrease from the 30 days previously offered. If, for any reason, you cannot pay within that time frame, you must speak to HMRC as you could incur penalties that make the bill a lot more expensive.

Can you not pay stamp duty?

In some cases, stamp duty isn’t payable at all. For example, if you gift your house to someone and there is no mortgage on it, they will not pay any SDLT on the value of the property. Should there be a mortgage left to pay, the stamp duty is calculated based on the value of the outstanding mortgage.

Other scenarios where stamp duty is not paid include when a property is left as part of a will and when property is transferred as part of a court order relating to divorce or separation.

At Gaffsy, we buy property fast, meaning you never have to worry about a chain failing to link. Our business model means we buy any home at all, anywhere in the country. If you are thinking about selling and prefer a fast sale over the typical 6 months or longer you get with traditional estate agents, speak to us. We can offer you a free cash offer and have funds with you fast. That way you can move on with your property plans quickly.

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