How is Stamp Duty calculated?

Stamp duty or as it is properly known, Stamp Duty Land tax, is a tax that gets paid to the government by the buyer of a property when they are purchasing a property or a piece of land. Over the last few years property prices have been increasing at a rapid pace meaning that an additional 1.5 million homes across the UK now attract stamp duty which for home movers kicks in at £125,000. First time buyers have also been hit, however, in that 1.9 million properties have now increased in value to the point that they are worth more than the £300,000 at which Stamp duty kicks in for first time buyers. So how is Stamp duty calculated throughout the UK and what can you expect to pay?

England

In England, stamp duty kicks in at a purchase price of £125,000 for home movers and £300,000 for first time buyers according to the following scale

  • Up to £125,000 – 0%
  • £125,001 to £250,000 – 2% of the property value
  • £250,001 to £925,000 – 5% of the property value for that portion
  • £925,001 to £1.5 million – 10% of that portion of the property value
  • Over £1.5million – 12%

If you are a first time buyer there is some relief:

  • Up to £300,000 – 0%
  • £300,001 to £500,000 – 5% of the property value
  • If the property is over £500,000 then first time buyers get no relief and pay according to the scale above.

If someone is buying a second property and this property is not a replacement for your main residence, i.e. you will own 2 properties, the rates above attract a further 3% tax

  • Up to £1250,000 – 3%
  • £125,001 to £250,000 – 5% of the property value
  • £250,001 to £925,000 – 8% of the property value for that portion
  • £925,001 to £1.5 million – 13% of that portion
  • Over £1.5million – 15%

As an example:

A purchase of a property with a value of £275,000 for an existing homeowner moving to a new home would attract the following SDLT:

Up to £125,000 – 0%

£125,001 to £250,000 at 2% of £124,999 = £2,499.98

£250,001 to £275,000 at 5% of £24,999 = £1,249.95

Total Stamp duty to be paid would be £3,749.93

Scotland

In Scotland the tax is called the Land and Buildings Transaction Tax (LBTT) and are charged at the following rates:

  • Up to £1450,000 – 0%
  • £145,001 to £250,000 – 2% of the property value
  • £250,001 to £325,000 – 5% of the property value for the portion above 250,001
  • £325,001 to £750,000 – 10% of the portion above £325,001
  • Over £750,000 – 12% of the portion above £750k

First time buyers get some relief on this and LBTT does not start until the property value is above £175,000.

For those buying a second property, there is an Additional Dwelling Supplement of 4% which is charged on the total purchase price if the price of the property is over £40,000.

As an example:

A first time buyer purchases a property for £250,000

Up to £175,000 – 0%

£175,001 to £250,000 at 2% of £74,999 = £1,499.98

Total LBTT to be paid would be £1,499.98

Wales

In Wales the tax is referred to as Land Transaction Tax (LTT) and is charged at the following rates:

  • up to and including £180,000 at 0%
  • £180,001 up to and including £250,000 at 3.5%
  • £250,001 up to and including £400,000 at 5%
  • £400,001 up to and including £750,000 at 7.5%
  • £750,001 up to and including £1,500,000 at 10%
  • £1,500,001 at 12%

If the property being purchased is a second property then the Higher Residential Rates apply and this adds 4% to the base tax rate:

  • up to and including £180,000 at 4%
  • £180,001 up to and including £250,000 at 7.5%
  • £250,001 up to and including £400,000 at 9%
  • £400,001 up to and including £750,000 at 11.5%
  • £750,001 up to and including £1,500,000 at 14%
  • £1,500,001 at 16%

There is no first time buyer relief in Wales

As an example:

A buyer purchases a second property for £475,000

up to and including £180,000 at 4% = £7,200

£180,001 up to and including £250,000 at 7.5% on £69,999 = £5,249.92

£250,001 up to and including £400,000 at 9% on £149,999 = £13,499.91

£400,001 up to and including £475,000 at 11.5% on £8,624.88

Total LTT payable is £34,574.71

When buying a property, the additional tax can add quite a significant cost to the purchase finances and anyone looking to buy a property will need to factor this into their calculations. In all cases, when understanding your personal circumstances and finances it is always prudent to seek expert financial advice.