What is stamp duty?

Stamp Duty is a tax you have to pay on the purchase of a house or land in England or Northern Ireland above a certain value. Pay stamp duty on residential property over £250,000 unless you qualify for first-time buyer relief. If you are eligible for a first-time purchase, you do not have to pay property stamp duty up to £425,000 and can pay a discounted rate on property purchases up to £625,000. This stamp duty tax applies to both freehold and leasehold property. Regardless of whether you buy outright or with a mortgage.

Stamp duty is a tax levied by HM Revenue & Customs. Also known as property tax in the UK. Stamp duty is levied on the portion within each range of the purchase price of the property. Taxes are calculated on the total purchase price including all other costs associated with the purchase, such as attorney fees, title transfer fees, and brokerage fees. The Berkhamsted estate agents explains below the benefits of stamp duty reduction for the first time buyers.

Benefits of stamp duty reduction for first-time buyers

Stamp duty is a charge for buying property in the UK. It’s often referred to as a ‘land tax’ because it is paid to the government when you purchase land or new homes. The amount of stamp duty you have to pay depends on how much your property costs, and can be extremely high.

A person seeking to acquire a sole or principal residence and who has never owned or held a tenancy in a residence in the UK or abroad is classified as a first-time purchaser.

First-time buyers are also those who are buying their first home, but they may have owned a previous home before. This includes any property they have lived in before moving into their current property.

There are many complex rules around stamp duty, but there are some ways to save money on this when buying your first home –

• In England or Northern Ireland, first-time buyers are exempt from paying Stamp Duty on homes up to £425,000.
• For properties up to £625,000, the first £425,000 stamp duty is waived. Then pay stamp duty at the appropriate rate of 5% on the remaining amount up to £200,000.
• If the property you’re buying is worth over £625,000, you will need to pay the standard rates of Stamp Duty and won’t qualify for first-time buyer’s relief.
• For homes costing more than £40,000, non-UK residents who purchase real estate in England or Northern Ireland may be required to pay an additional 2% in stamp duty on top of the current rates.
• Stamp Duty is a tax on purchasing property in England, Northern Ireland and Wales. First time buyers who are not married, or civil partners are entitled to relief from Stamp Duty.
• You will have to pay an additional 3% in Stamp Duty on top of the usual rates if you’re purchasing a second house or any additional property. Properties purchased at £40,000 or more are subject to this higher rate. Caravans, mobile homes, and houseboats are not covered.

The stamp duty exemption was a temporary relief available to first-time home buyers in 2021 and 2022. The introduced higher zero-tax threshold of £500,000 also applied to first-time buyers, which allowed first-time buyers to purchase up to £500,000 worth of property and pay no stamp duty at all. It meant there was no need.

When the broader stamp duty rate was reduced to £250,000 from 1 July 2021, her £300,000 normal first-time purchaser stamp duty relief threshold was reactivated. An increase to £425,000 was then introduced as part of the mini-budget announced in September 2022.

On the whole, first-time buyers will be pleased with this significant reduction in the cost of their purchases. This can only be a positive thing for the housing market and, in turn, the wider economy. You can do the Stamp Duty return and any payment yourself, but typically your lawyer will take care of it for you.