In an attempt to spark growth within the housing market, these stamp duty changes will make it much more affordable for people to move house and easier for many first-time buyers to get on the housing ladder.[1]
How stamp duty works
Stamp duty is a tax that homebuyers might have to pay when purchasing a property and is charged on the purchase price of a home and levelled at different rates above thresholds. How much stamp duty you pay will vary depending on whether you’re a first-time buyer and the value of the property.
Who pays stamp duty
Stamp duty is always paid by the person buying the property. After completion of the property sale, you will have 14 days to file a return to HM Revenue and Customs (HMRC) and pay any stamp duty due. Typically, your solicitor, estate agent or conveyancer will usually calculate and pay any stamp duty on the day of completion on your behalf and will also claim any tax relief that you might be eligible for.[2]
How much is stamp duty?
How much stamp duty you pay generally depends on the value of the property you want to buy and whether you are a first-time buyer. SDLT (Stamp Duty Land Tax) only applies to properties over £250,000 (from 23/09/2022). The threshold is where stamp duty starts to apply. If you buy a property for less than the threshold (£250,000), there’s no stamp duty to pay.[3]
Following the recent mini budget on the 23rd of September and former chancellor Kwasi Kwarteng’s announcement, the current stamp duty thresholds are:[3]
- £250,000 for residential properties
- £425,000 for first-time buyers buying a residential property worth £625,000 or less
- £150,000 for non-residential land and properties
A buyer splashing out £500,000 on a residential home will now be charged £12,500 rather than the previous £15,000.[4]
If you’re buying your first home
For first-time buyers, the stamp duty changes mean a threshold increase from £300,000 to £425,000 (from 23/09/2022); meaning that first-time buyers do not have to pay stamp duty if their home costs less than £425,000. First-time buyers will also receive a reduced rate (5% SDLT) if their home costs between £425,001 – £625,000.[4]
Additionally, former chancellor Kwasi Kwarteng also increased the value of the property on which first-time buyers can claim stamp duty relief from £500,000 to £625,000. Previously, first-time buyers would only benefit from different stamp duty rates if the cost of the property they were buying was £500,000 or less. First-time buyers will however pay the standard stamp duty rates if purchasing a property greater than £625,000. This means that first-time buyers could save a maximum of £6,250 on the purchase of their home, while everybody else could save up to £2,500.[5]
Do you pay stamp duty on a second home?
If you’re buying an additional property, such as a second home you’ll have to pay an extra 3% in Stamp Duty on top of the standard rates. This increased rate applies to properties bought for £40,000 or more and doesn’t apply to caravans, mobile homes or houseboats.[6]
With these above changes, Kwasi has suggested that this permanent cut should remove around 200,000 people from paying SDLT each year.[2]
