The way Stamp Duty is charged has changed for the better recently, meaning that most homebuyers will pay less Stamp Duty than they would have before.
What is stamp duty?
When you buy a home for more than £125,000, the Government charges you a tax called Stamp Duty Land Tax (SDLT). The amount you pay is dependent on the value of the property you purchase.
The rate at which Stamp Duty is charged changed in England, Wales and Scotland on December 4, 2014. Further changes will come into effect in Scotland in April 2015. Find out more about the Land and Buildings Transaction Tax in Scotland.
How has Stamp Duty changed?
Until recently, you would have paid the same rate of Stamp Duty on the entire property transaction.
So if you purchased a home at £250,000, you paid 1% on the whole transaction. If you purchased a home at £250,001; just £1 over the threshold, you paid 3% on the whole transaction.
Now, the amount of Stamp Duty you will pay increases on a sliding scale rather than in big jumps - like income tax.
That means you’ll pay new stamp duty rates on the part of the property price within each tax band, as follows:
- nothing on the first £125,000 of the property price
- 2% on the next £125,000
- 5% on the next £675,000
- 10% on the next £575,000
- 12% on the rest (above £1.5 million)
What does that mean in practice?
For example, if you buy a property for £275,000, you’ll pay £3,750 of SDLT, as follows:
- £0 on the first £125,000
- £2,500 on the next £125,000
- £1,250 on the remaining £25,000
- Total = £3,750
Under the old rules, you would have paid 3% on the total purchase price - costing you £8,250.
Take a look at our examples below.