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Stamp Duty Explained - Everything you need to know about Stamp Duty in the England and Northern Ireland

By Maurice Shasha  //  Mon 16th August 2021
Stamp duty rates in England and Northern Ireland are changing as the stamp duty holiday starts to be phased out.
Stamp Duty Explained

What is stamp duty?

Stamp duty is a tax that you pay when buying a home in England or Northern Ireland. The amount you pay depends on: 

  • the value of the property 
  • whether you are a first-time buyer 
  • whether or not this is your only property.  

How much is stamp duty?

In July 2020, following the first Covid-19 lockdown, the government introduced a stamp duty holiday to boost the property market by helping buyers whose financial situation had been adversely affected by Covid. During the stamp duty holiday period, no tax was payable on the first £500,000 of the purchase price, offering savings for buyers of up to £15,000. 

From July 2021, Stamp duty is returning to normal rates in stages. 

What are the rates from 1st July 2021?

From 1st July to 30th September, buyers won't pay any stamp duty on the first £250,000. 
  • Up to £250,000 – 0% 
  • £250,001 to £925,000 – 5% 
  • £925,001 to £1,500,000 – 10% 
  • £1,500,001 or over – 12% 

What are the rates from 1st October 2021?

From 1st October the rates will return to normal. 

  • Up to £125,000 – 0% 
  • £125,001 to £250,000 – 2% 
  • £250,001 to £925,000 – 5% 
  • £925,000 to £1,500,000 – 10% 
  • £1,500,001 or over – 12% 

How do I calculate my stamp duty bill? 

Stamp duty is calculated according to the portion of the property price that falls into each band. 

For example, if you purchase a property for £800,000 completing on or before 30th September 2021, the tax you owe is calculated as follows: 

  • 0% on the first £250,000 = £0 
  • 5% on the remaining £550,000 = £27,500 
  • Total stamp duty = £27,500 

On purchases that complete from 1st October, you will pay a little more. 

  • 0% on the first £125,000 = £0 
  • 2% on next £125,000 = £2,500 
  • 5% on the remaining £550,000 = £27,500 
  • Total stamp duty = £30,000 

Do I qualify for first-time buyer relief? 

First-time buyers in England and Northern Ireland benefit from tax relief on stamp duty. For properties costing up to £500,000, no stamp duty is payable on the first £300,000. Stamp duty is payable at 5% for the remaining amount (up to £200,000). 

The standard rates apply if the property costs more than £500,000. 

You will be considered a first-time buyer if you have never owned residential property in the UK or abroad. If you are buying with a partner, both of you must be first-time buyers to qualify. The 'buyer' part is slightly misleading. If you have inherited or been gifted property in the past, you won't be eligible for this tax relief. 

What if I am buying a second home or buy-to-let property? 

If you are buying a second home or a buy to let property, you will have to pay a 3% surcharge on top of the standard rates outlined above. 

If you bought your new home before selling your previous one, you would still need to pay this 3% levy. However, if you sell your previous main home within three years, and the additional home is now your main one, you will be able to claim a refund of the 3% surcharge you paid.   

What if I'm not a UK resident? 

Non-UK residents buying property in England and Northern Ireland are subject to an additional 2% on top of the regular rates. Non-UK residents purchasing an additional property have to pay both the second home surcharge and the overseas resident surcharge, effectively increasing the rates by 5%. 

Can I reduce my stamp duty bill by inflating the cost of fixtures and fittings? 

Stamp duty does not apply to moveable furniture and fittings you are buying off the previous owners. This would include freestanding furniture, carpets and curtains but exclude anything attached to the building like bathroom and kitchen fittings and built-in cupboards. You can subtract the price you paid for moveable items from the property's sale price before calculating stamp duty. 

Do not be tempted to exaggerate these items' prices to reduce your stamp duty bill. HMRC conduct regular spot checks and will require you to justify the value of the fixtures. 

How do I pay stamp duty? 

You have 14 days from completion to pay any stamp duty that is due. Usually, your conveyancing solicitor will do this for you having collected the money from you in advance. 

If you are looking at a property purchase near Paddington, contact Plaza Estates. We can advise you about stamp duty as well as other aspects of your house purchase and show you our current selection of properties. 
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