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UK Stamp Duty Explained by Real Estate Experts

August 10, 2022 | Investments   Sales  

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Stamp Duty: Explained

The Stamp Duty was first introduced during the reign of William and Mary, and has been with us in one form or another ever since. In 1808, the Stamp Duty was extended from incidentals to conveyances of sale, including land transfers, and became a graduated tax based on the value of the transaction. Today, anyone hoping to purchase real estate needs to be mindful of the Stamp Duty that will be assessed, as it could be quite significant.

Stamp Duty: The Basics

The Stamp Duty, or Stamp Duty Land Tax, is assessed on real estate purchases in the UK. As mentioned, this is a graduated tax assessed on the value of the transaction and the tax rate applied will vary depending on whether you are a first-time buyer or a foreign buyer and whether the property is intended to be a main residence or second property.

Typical Assessments

As mentioned, different circumstances will generate different Stamp Duty rates. For the purposes of this article, we will focus on the rate that applies if you are a UK citizen purchasing a new residence which will be your only property but not your first property.

Value of the Property Stamp Duty Rate
Up to £125,000 0%
£125,001 – £250,000 2%
£250,001 – £925,000 5%
£925,001 – £1,500,000 10%
More than £1.5 million 12%

As the chart implies, the Stamp Duty on homes exceeding £925,000 can be significant. Therefore, it is crucial that you factor this cost in when determining which properties are within your budget and which are not.

First Time Buyers

If you are a first-time buyer looking to purchase your first home, then you could benefit from some hefty savings. If you are purchasing a property less then £300,000 then you will not be required to pay any stamp duty at all. If you are lucky enough to afford a property over this price cap, then you will pay 5% on any amount above £300,000.

If you are a first time buyer purchasing a buy-to-let property then you will also be eligible for the above savings. While it is rare for investors to not already own a main residence of their own, this may apply to someone who is renting or living with family.

Stamp Duty Involving 2nd Homes and Non-UK Residents

Stamp Duty rates were increased by 3% in 2016 for people purchasing 2nd homes or buy-to-let residences in England, Northern Ireland, and Wales. For non-UK residents seeking to purchase a 2nd home in the UK, there is an additional 2% surcharge, in addition to the 3% surcharge that came about in 2016.

Portion of property price (England and NI) Buy-to-let stamp duty rate
£0 – £40,000* 0%
£0 – £125,000** 3%
£125,001 – £250,000 5%
£250,001 – £925,000 8%
£925,001 – £1.5m 13%
£1.5m+ 15%
Rates also apply to second homes and holiday homes.
*If total property price is £40,000 or less. **If total property price is more than £40,000, you’ll pay the surcharge on the whole cost of the property.

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Contact HOP

To learn more about Stamp Duty, including possible exemptions, contact the team at HOP by calling 0113 320 2000.

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