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UK Stamp Duty Explained

What is Stamp Duty?

Stamp duty land tax is a lump-sum tax that anyone buying a property or land costing more than a set amount has to pay. The rate you’ll pay the tax at varies based on the price of the property and the type.

Under the current system – which applies to England & Northern Ireland – you’ll only pay the rate for the proportion of the property that’s at that rate. It’s quite complex, so here’s an example to better illustrate how it works:

Let’s assume you’re buying a property for £500,000.

You pay nothing below £125,000.
You pay 2% on between £125,001 and £250,000, which is £2,500.
You pay 5% on the value of the property between £250,001 and £500,000, which is £12,500
.

So in total this means you’ll pay £15,000 (£0 + £2,500 + £12,500)

 

Purchase Price Rate on Main Property Rate on a second property
Up to £ 125,000 0% 3%
£ 125,001 – £ 250,000 2% 5%
£ 250,001 – £ 925,000 5% 8%
£ 925,001 – £ 1,500,00 10% 13%
£ 1,500,001 + 12% 15%

 

As the price you pay for a new property increases, so do the rates of stamp duty. You pay a percentage of the cost, and the rate payable leaps up at a set of thresholds – but, you only pay the proportion of the purchase price that’s actually above the thresholds at the higher rate.

People buying an additional property (ie, in addition to any they already own) will be penalised in the form of an extra stamp duty charge on any property costing more than £40,000.

Under stamp duty rules that took effect in 2014 you pay different rates for different proportions of the property price. This will mean that the following additional property stamp duty rates will apply on each portion of the purchase price on buy-to-let and second homes.

How and when do i pay stamp duty?

The crucial thing to know is that, if you’re buying in England or Northern Ireland, you have 14 days from the date of completion/date of entry (when all the contracts are signed and dated and you get keys) to pay stamp duty or transaction tax. Take longer and you could face a fine and possibly interest on top, so don’t!

Buyers used to have 30 days to pay stamp duty, but new legislation reducing this to 14 came into effect in March 2019.

In reality, your solicitor will probably sort this out and push you to pay the bill straightaway – in fact, most tend to want their cash before completing the property purchase for you, just in case you then can’t or don’t pay them.

However, it’s legally your responsibility to ensure your stamp duty/transaction tax is paid. 

In case your solicitor doesn’t do this for you, here’s what you need to do…

  • Find your unique transaction reference number (UTRN).It’s 11 characters long and found on your submission receipt if you have filed online, or on your paper stamp duty return.
  • Pay online or by phone banking?Just as you might move money to a pal’s account, you can call up your bank, use HM Revenue & Customs’ bank details, and pay it. This normally takes three working days, so take this into account and don’t miss the deadline.
  • Other ways to pay.If you don’t have online or phone banking set up, you can pay by card over the web (though there’s a charge for credit cards), giro in most banks or by cheque in post office branches or post – though the last three options require you to present a payslip.

 

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