UK Stamp Duty Explained

Stamp Duty facts: What is it? How is it calculated? - when and how do I pay it? ...In this article we will cover everything that buyers will need to know about Stamp Duty, when making a purchase in the UK.

20, MAY 2017

When you purchase a property in the UK the British government will levy a tax on the transaction, and this is levy is known as Stamp Duty Land Tax (commonly known as ‘stamp duty’ or ‘SDLT’). Just like the name suggests, this is a transaction tax, based on the transfer (sale) of a land asset. Read on to find out the basics of UK Stamp Duty…

Stamp Duty is the single largest purchase cost that buyers will be faced with, after the cost of the property itself. Knowing this, it's important to be clear on how Stamp Duty is calculated, and which category (or 'band') you'll fall into. Once you know this, it's going to be much easier to budget for your property purchase - you'll be able to quickly work out how much duty you'll need to pay at each price point.

Let's begin with most basic facts:

- Stamp Duty Land Tax is levied on all property purchases over £125,000 made in the UK.

- Stamp duty is a banded tax (rather than a flat rate tax) so the amount payable varies based on the purchase price.

- You pay Stamp Duty Land Tax at the time you are completing your property purchase.
Stamp Duty Land Tax is levied on all property purchases over £125,000 made in the UK.
The big question: How much will I pay?

There are two rates for Stamp Duty:

- The single property rate (or base rate) is paid by buyers purchasing their first home

- The additional property rate is paid by buyers who already own 1 or more properties, anywhere in the world. The additional property rate is 3% higher than the base rate.

See the table below for the present rates of UK Stamp Duty, and carrying on reading for a quick calculation solution...
Note that unless you are First Time Buyer, you'll be paying the Additional Property rate. Even if the properties you already own are outside the UK.
To quickly calculate the tax due on any property, you can use this helpful online tool... Click this text to head over and try it out now.
This great online tool will instantly work out your liability, as well as showing you the breakdown of how this figure is calculated under the bracketed system.

Once you know which band you are in, and have calculated your Stamp Duty tax liability, there is one big question left...

When and how do I pay?

- Stamp duty is due within 30 days of completion of your property purchase.

- Luckily, your solicitor will arrange the payment of your Stamp Duty for you. They will confirm the amount of Stamp Duty you are required to pay, and you will send this amount, along with your purchase funds, to your solicitor prior to completion.

- Your solicitor will then ask you to sign a form that they will lodge, along with the payment, at HMRC (the tax department).

...and that's it. All done.

Stamp Duty is a significant financial burden, and makes up the bulk of your closing costs. For buyers from outside the UK, it can come as a shock to find out that the purchase costs can be quite so hefty. The good news is that once you own a UK property the running costs are surprisingly low. Annual property taxes (known in the UK as 'council tax') are extremely low compared to the USA and others.

If you still have questions about Stamp Duty, or about the other transactional and operating costs of a UK purchase, get in touch with our office via phone or email.
The Author
I'm Jemimah

I'm an independant Property Advisor & Buyer, working with residential home buyers, and investors. Find out more about my work or contact me.