If you want to buy a home in England or Northern Ireland, you need to know about stamp duty. It is important that you know what stamp duty is and how it is paid. You should also know about the differences in stamp duty for first-time buyers and second homes.
What Is Stamp Duty?
Stamp duty or Stamp Duty Land Tax is a form of tax payable when you buy a residential property in England or Northern Ireland. You also need to pay stamp duty when you buy land. The tax is not charged on all land and property as there are price thresholds.
You will only pay stamp duty on a property or piece of land that costs more than £125,000 as a first-time buyer. If you are looking at a second home, the threshold is lower at £40,000. Stamp duty is charged on both leasehold and freehold properties and if you buy using a mortgage or outright. If you are buying a property in Scotland, you will have to pay Land and Buildings Transaction Tax instead and in Wales the Land Transaction Tax.
How Much Is Stamp Duty?
Knowing that you have to pay stamp duty is important, but you will want to know how much this is. There are different rate bands based on the purchase price of the property. It is recommended that you use a stamp duty calculator to get the best estimate of the costs.
To get a rough understanding of the costs, you need to know the rate bands. As a first-time buyer, a property up to £125,000 will have a 0% stamp duty. Property between £125,001 and £250,000 has a duty of 2% and property up to £925,000 a duty of 5%. Properties with a price up to £1.5 million have a duty of 10% and those over £1.5 million a duty of 12%. This final percentage is the highest stamp duty rate.
The stamp duty rate for second homes and buy-to-let properties will be different. People buying these properties will pay an extra 3% on top of the rates for first-time buyers. The rate bands also start at £40,000. Stamp duty does not apply to caravans, houseboats and mobile homes.
Stamp duty is a property transaction tax that you have to pay based on the purchase price of the property. There is some relief from stamp duty for first-time buyers, but you will need to claim this relief as a refund. Stamp duty is only applicable for properties purchase in England and Northern Ireland.