What is stamp duty and when do you have to pay it?

Buying a home unfortunately means coming face to face with stamp duty, one of Britain’s most hated taxes. 

What you pay depends on the price of the property you’re buying, and what kind of property buyer you are. Tax rates and thresholds also vary depending on where you are in the UK. 

Here, Telegraph Money sets out how stamp duty works, when you have to pay it, and the instances where you can claim a refund.

Table of contents

• What is stamp duty?
• When do you have to pay stamp duty?
• Stamp duty for first-time buyers
• Stamp duty for home movers
• Stamp duty on buy-to-let and second homes
• How to pay stamp duty

What is stamp duty?

Formally called Stamp Duty And Land Tax in England and Northern Ireland, stamp duty is the tax paid when you buy a property.

It is, even by tax standards, markedly unpopular.

The levy is paid in banded thresholds based on a property’s value. You have to pay stamp duty regardless of whether your property is freehold or leasehold, or if you are buying through a shared ownership scheme. You’ll pay a surcharge if you already own another residential property – this was recently increased to 5pc (up from 3pc) in Labour’s Budget.

The equivalent tax exists in Scotland as Land and Buildings Transaction Tax (LBTT), and in Wales as Land Transaction Tax (LTT), where rates and thresholds vary.

How much is stamp duty and how is it calculated?

Stamp duty has become more complicated over the years, thanks to the various tax rates and thresholds that vary depending on what kind of property buyer you are – and some of the rates are only temporary. 

In a similar way to income tax, stamp duty rates are applied to the portions of the property value that sit within each band. 

Until April 1 2025

First-time buyers:

• Up to £425,000: 0pc
• £425,001-£625,000: 5pc

First-time buyers purchasing a property with a value of more than £625,000 will be treated as a home mover for stamp duty purposes.

Home movers:

• Up to £250,000: 0pc
• £250,001-£925,000: 5pc
• £925,001-£1.5m: 10pc
• More than £1.5m: 12pc

On October 31, a higher levy of 5pc was introduced for those buying a property that’s in addition to the property they live in – this includes second home owners and buy-to-let investors.

Second homes:

• Up to £250,000: 5pc
• £250,001-£925,000: 10pc
• £925,001-£1.5m: 15pc
• More than £1.5m: 17pc.

From April 1 2025

First-time buyers:

• Up to £300,000: 0pc
• £300,001-£500,000: 5pc

First-time buyer relief is lost for properties with a value of more than £500,000.

Home movers:

• Up to £125,000: 0pc
• £125,001-£250,000: 2pc
• £250,001-£925,000: 5pc
• £925,001-£1.5m: 10pc
• More than £1.5m: 12pc

On October 31, a higher levy of 5pc was introduced for those buying a property that’s in addition to the property they live in – this includes second home owners and buy-to-let investors.

Second homes:

• Up to £125,000: 5pc
• £125,001-£250,000: 7pc
• £250,001-£925,000: 10pc
• £925,001-£1.5m: 15pc
• More than £1.5m: 17pc.

No stamp duty is owed on properties with a value of less than £40,000.

If you buy a new home to move into before you’ve sold your existing home (due to delays further down the property chain, for example), you’ll pay the second-home surcharge – but you can apply for a refund if you sell your previous main home within 36 months.

To see how much you’ll owe – and how much your tax bill will change from April – use Telegraph Money’s stamp duty calculator.

When do you have to pay stamp duty?

Stamp duty has to be paid within 14 days of completing a house purchase, and it will often be handled by your solicitor or conveyancer – but you can do it yourself.

If you fail to submit the return and pay within the time frame, you may face penalties from HMRC; the tax authority will charge £100 for returns that are up to three months late, and £200 if the return is later. This is in addition to a tax-based penalty, which varies depending on how much tax is owed and how late the payment is.

This means you need to make sure your budget includes the amount you will owe when working out your total costs for the purchase and move.

You can include stamp duty costs as part of your mortgage borrowing and pay for it that way, but it will incur additional interest.

Who pays stamp duty?

Stamp duty is paid by nearly all residential property buyers purchasing homes worth more than £250,000 (reducing to £125,000 from April 1 2025).

However, there are exceptions. 

You won’t pay stamp duty if you inherit a property in a will – even if you’re taking on an outstanding mortgage. However, you may need to pay inheritance tax, and inheriting a property (or even a portion of a property) will mean you lose your first-time buyer status if you buy a property at a later date.

There’s also no stamp duty to pay if property ownership is transferred due separation or divorce.

Stamp duty for first-time buyers

If you are buying your first home, the nil-rate extends up to £425,000, giving younger buyers a chance of getting on to the property ladder without a significant tax charge.

From £425,001 to £625,000, first-time buyers pay 5pc of the value of their home over £425,001. First-time buyers purchasing properties over £625,000 won’t receive the relief, and will pay the same stamp duty rates as home movers.

For properties under £625,000, this breaks down as below:

• £0-£425,000 – 0pc
• £425,001-£625,000 – 5pc.

From April 2025, first-time buyers will pay no stamp duty up to £300,000, and 5pc of the property value between £300,001 and £500,000.

This means properties over the value of £500,000 are not eligible for first-time buyer reliefs, so you will be taxed at the same rate as previous property owners. 

Anyone buying a shared ownership property can choose to either pay stamp duty in one go, based on the property’s market value, or pay the tax in stages.

If you opt to pay the full stamp duty cost, you pay for the full value of the property despite only buying a portion of it – the remaining portion is usually rented out by a housing association. However, if you decide to buy a larger share of the property later on (known as “staircasing”), then you won’t have any more stamp duty to pay.

If you only pay proportional stamp duty, you’ll then have to pay more each time you want to staircase and increase your share. Some shared ownership homeowners have found the added stamp duty costs have prohibited them from increasing how much they own.

Stamp duty for home movers

If you are simply moving from one home to another, and don’t own two properties at the same time at any point, stamp duty costs will work as below:

• £0-£250,000 – 0pc
• £250,001-£925,000 – 5pc
• £925,001-£1.5m – 10pc
• More than £1.5m – 12pc

This is also what you’ll pay as a first-time buyer purchasing a property with a value of more than £625,000.

From April 1 2025, these rates will change, as the nil-rate threshold is lowered to £125,000. The new stamp duty costs will work out as below:

• £0-£125,000 – 0pc
• £125,001-£250,000 – 2pc
• £250,001-£925,000 – 5pc 
• £925,001-£1.5m – 10pc
• More than £1.5m – 12pc

These rates will also apply to a first-time buyer from April 2025 if the property value is over £500,000.

Stamp duty on buy-to-let and second homes

Buying a second home or buy-to-let property will mean handing over more cash to the taxman as you pay an additional 5pc in stamp duty, on top of the existing bands. This was increased from 3pc on October 31, as part of Labour’s Budget measures.

• £0-£250,000 – 5pc
• £250,001-£925,000 – 10pc
• £925,001-£1.5m – 15pc
• More than £1.5m – 17pc

When thresholds are lowered in April 2025, purchases of a second home will likely demand higher stamp duty costs as below:

• £0-£125,000 – 5pc
• £125,001-£250,000 – 7pc
• £250,001-£925,000 – 10pc
• £925,001-£1.5m – 15pc
• More than £1.5m – 17pc

The additional levy does not apply if the home you are buying is your primary residence and your old home has already been sold at the time of purchase.

Furthermore, even if you still own your old home when you buy the new one, selling it within 36 months entitles you to a stamp duty refund. This deadline may be extended if extenuating circumstances mean you could not claim the refund within this timeframe.

Non-residential property stamp duty

Any non-residential or mixed use property bought for over £150,000 is subject to stamp duty. Non-residential property typically means commercial property, or property that isn’t suitable to live in. A mixed property is one that has both residential and non-residential elements, such as a flat with a shop underneath.

For tax purposes, the category also includes six or more residential properties bought in a single transaction.

You also pay stamp duty on agricultural land, even if it comes as part of a residential property, for example a cottage with fields.

You may pay a higher rate of duty for multiple purchases, or transfers from the same seller.

The tax is also calculated differently from residential stamp duty. Two amounts are calculated separately and then added together; the purchase price of the lease and the value of the annual rent you pay.

Stamp duty for non-UK residents

Since 2021, non-UK residents have had to pay a higher rate of stamp duty when purchasing property in England and Northern Ireland.

The additional levy is two percentage points above the rate for UK residents on the given tax band. For example, where a UK resident will pay 5pc tax on a property bought for £250,001-£925,000, a non-UK resident will pay 7pc.

Overseas buyers also face an additional 2pc surcharge on top of the existing 3pc tax on second homes and buy-to-let properties.

How to pay stamp duty

Your solicitor should be able to either help you arrange the stamp duty payment, or just make the transaction on your behalf.

If you have a lawyer or conveyancer acting for you, they can submit the stamp duty return online, but if you are managing it yourself it needs to be done via a paper form. You can order the form you need – SDLT1 – online or by calling HMRC.

The Government advises against sending any other correspondence with the form as it may delay the processing.

It is also important to send the form off in good time to allow for postal delays. HMRC recommends allowing three days for the form to reach the department.