Stamp duty is a tax that has been applied to British legal documents since 1694. The theory is that a government “stamp” makes the document legal. In reality, of course, it is just another way for governments to raise funds.
Stamp duty on land and house purchases has been a political football in recent years. With homes hard to afford, the justification for adding tax has been hotly debated and the law has been changed several times.
Are you liable?
“Stamp Duty Land Tax” now only officially applies in England and Northern Ireland. However, Scotland simply replaced it with “Land and Buildings Transaction Tax” in 2015, while Wales replaced it with “Land Transaction Tax” in May 2018. Costs differ between the regions.
In England, first-time buyers are exempt if the purchase price is under £300,000. Between £300,000 and £500,000, a first-time buyer only pays duty on the difference at a rate of 5%. If it’s over £500,000, there are no stamp duty discounts.
Non-first-time buyers pay 2% tax on the amount between £125,000 and £250,000, plus 5% on any amount between £250,000 and £925,000, plus 10% on any amount between £925,000 and £1.5 million, and 12% on any amount above that.
If you own another property that you aren’t selling, the rates are higher. Between £40,000 and £125,000, tax is levied at 3%. Any amount above that attracts 5% up to £250,000, then 8% up to £925,000, 13% up to £1.5 million and 15% thereafter.
Because London prices push almost all houses into higher bands, you should always seek expert advice. Try https://www.samconveyancing.co.uk/Conveyancing-Solicitors/Conveyancing-Solicitors-London or search for “conveyancing solicitors London”. There are sometimes loopholes in cases of inheritance, divorce, or early resale of new or earlier properties.
Wales and Scotland
In Wales, residential property purchases over £180,000 attract tax at 3.5%. The rate rises for different bands. For the highest band, it is 12.5% of your purchase price. If you already own other properties, the rates are different and rise to 15% of the total. Non-residential properties also have different rates. Check the current rates at https://gov.wales/land-transaction-tax-rates-and-bands.
In Scotland, tax is owed on properties over £145,000, but the initial rate is just 2%. This rate rises in bands up to a maximum of 12% on any amount exceeding £750,000. As in Wales, the rates for second properties and commercial land are different.