BEGINNER'S GUIDE FOR STAMP DUTY


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The cost of buying your first home extends beyond the price you pay for the property itself. And one of the biggest potential costs for homebuyers is stamp duty. For first-time buyers, stamp duty can seem complicated. When you buy a residential property or a piece of land costing more than £125,000 you are liable to pay stamp duty. For the purchase of second homes, the stamp duty threshold is £40,000.

The property buyer is responsible for paying the stamp duty tax based on the purchase price, not on the amount borrowed with a mortgage. This may all sound a bit confusing. That’s why we’ve created our beginner’s guide to stamp duty to try and provide a clearer picture.

 First Time Buyers

If you have never owned a property before you are classified as a first-time buyer. If you are purchasing a property as a couple, you will both need to be classified as first-time buyers to be eligible for stamp duty tax relief.

The first-time buyer tax relief scheme was introduced in 2017 to help support new property owners. As property prices increased out of sync with the cost of living, the government created a tax relief scheme to encourage first-time buyers.

For house purchases of up to £300,000, no stamp duty needs to be paid by first-time buyers.

For properties that cost £300,001 up to £500,000, first-time buyers will pay 5% on any value over £300,000. For example, if the property costs £350,000, you would pay 5% stamp duty tax on £50,000.

If a first-time buyer purchases a property costing over £500,000, then they are not eligible for any relief. The standard levels of stamp duty will be payable.

Am I classed as a first-time buyer?

To be classed as a first-time buyer and claim first-time buyer relief on stamp duty, you must:

  1. Have never previously purchased a property in the UK or abroad
  2. Be buying a property that will be your main residence
  3. Have never inherited or been gifted a property
  4. Both be classed as first-time buyers if you’re buying with someone else

Second Home Stamp Duty

If you are buying a second property, perhaps as a holiday home or a buy to let, then the rate of stamp duty you are required to pay is different than if you own just one property.
For second properties costing £40,000 or more, the buyer is responsible for paying stamp duty tax.

The rate increases by an additional 3% on top of the standard stamp duty for each band. This doesn’t apply to caravans, mobiles homes, or houseboats.

How to Calculate Stamp Duty

The rate of stamp duty to pay is divided into percentage price bands:

  1. 0% on the first £125,000
  2. 2% on the next £125,000 (the value between £125,001 to £250,000)
  3. 5% on the next £675,000 (the value between £250,001 to £925,000)
  4. 0% on the next £575,000 (the value between £925,001 to £1.5 million)
  5. 12% on the remaining amount (the portion above £1.5 million)

Will my mortgage affect my stamp duty bill?

The type of mortgage you choose to buy your first home could affect your eligibility for first-time buyer stamp duty relief.

Joint mortgages

If you’re taking out a joint mortgage with another person, both of you must be classed as first-time buyers to claim stamp duty relief 

Guarantor mortgages

If your guarantor isn’t named on the title deeds of the property you’re buying, you should be able to claim first-time buyer stamp duty relief 

When does Stamp Duty have to be paid?


Stamp duty tax is due once you have completed the purchase of your property. It is normal for your solicitor to handle the payment, but it is the buyer’s responsibility to check that it has been paid.

If you are considering purchasing a property is it important for you to calculate if you can afford the stamp duty and solicitors fees.

Fortess Homes Advice

If you want to buy a property but aren’t sure if you can afford it, a mortgage broker can help. At Fortess Homes, we search the market for the best deals for you to find out what is possible. We also provide advice and guidance on all aspects of buying a house and can answer any questions you may have. To find out more contact our team now!