UK Stamp Duty – Current Rates

Stamp Duty in the UK is the quaint old term for the government’s slice of the action on your home purchase. That’s right it’s a tax. It’s not just the seller who makes money when you buy a house. The Government gains too – in the form of stamp duty. It makes around £5 billion a year from this 300-year-old property transfer tax. Unless you’re buying in an area it has designated as ‘disadvantaged’, you’ll be obliged to pay if your chosen property costs more than £125,000.

Stamp Duty – Contents

 

Current Stamp Duty Rates

Before the “Chancellor’s Autumn Statement” of December 2014 stamp duty was charged as a fixed percentage strictly on property price.

For example a house that cost £250,000 would be charged 1% (ie £2,500) whereas a house that cost only £1 more ie £250,001 would have to pay 3% (ie £7,500).
Not very clever… and property prices were set accordingly.
However that wonderful Mr Osborne changed this so that the % is “tiered”.
Now you don’t pay any stamp duty on the first £125,000 but you’ll be due to pay 2% of the remainder up to £250,000.
For example the house that costs £250,000 will now pay £2,500 whereas it’s neighbouring house that costs only £1 more ie £250,001 would also be due to pay £2,500 plus 50p (the additional 50p being 2% of the extra £1).

These are the new Stamp Duty Rates Bands from 4/12/2014

Purchase price of property Stamp Duty Payable
Up to £125,000 0
£125,001 to £250,000 2%
£250,001 to £925,000 5%
£925,001 to £1,500,000 10%
£1,500,001 plus 12%

For example:

A property that costs £300,000 would be due to pay £5,000 because:
The first £125,000 = £0
The next £125,000 (that takes it up to £250,000) is taxed at 2% ie £2,500…
Then the next £50,000 (that takes it up to the total of £300,000) is taxed at 5% ie another £2,500.
£2,500 plus £2,500 = £5,000 to Mr Osborne / UK Government.

Previous Stamp Duty Rates Bands up to 3/12/2014

The amount charged depends on the purchase price of the property. The previous rates for UK Stamp Duty were as follows:

Purchase price of property Stamp Duty Payable
Up to £125,000 0
£125,001 to £250,000 1%
£250,001 to £500,000 3%
£500,001 plus 4%

For prices higher than these see the official UK Government stamp duty figures here To see the exact amount you would pay for a property see the Stamp Duty Calculator

 

Stamp Duty Holiday for First Time Buyers

First time buyers do not have to pay stamp duty for purchases less than £250,000 This “tax holiday” started from March 25th 2010 and – at the time of writing – will run for 2 years. Property deals completing after March 25th are eligible Anyone who has ever owned or had a share in a property – any where in the world – is not eligible. A parent buying a property for their child – the parent having owned property before and the child not – would not be eligible (There may be some ways around this sing a guarantor mortgage but you would need to check with a mortgage broker. A couple, or a group of friends etc, who are buying a house together- where one of the partners has owned property before – could put the house in the name of the first time buyer only and thereby save on the stamp duty charge Buyers will have to sign a tax return at the time of purchase stating that they are claiming the first time buyers relief from Stamp Duty.

 

Apportioning / “AVOIDING” Stamp Duty

It’s important to keep the stamp duty bands in mind when you agree a purchase price for a property. Buy for £125,000 and there’s no tax due, but pay £125,001, and you’ll face a bill for £1,250.01.

There’s an even more painful jump if your property costs just above the £250,000 barrier. Pay exactly £250,000, and you’ll be charged £2,500. Pay £250,001 and this leaps £5,000 (and some loose change) to £7,500.03.

When the price of a property is just above the £125,000, £250,000 or £500,000 threshold, ‘apportioning’ is often used to push it back into a lower stamp duty bracket.

The purchaser and seller agree a price that falls just below the threshold, but the purchaser undertakes to pay an additional sum for ‘fixtures and fittings’ – which could include things like curtains, carpets or white goods – taking the total price to a level the seller is happy with.

But be warned: Revenue & Customs checks a proportion of these transactions and will challenge any that arouse its suspicions. So if you come to an apportioning deal, make sure you can prove the sum involved was realistic – and that the transaction actually took place – or the Revenue could come after you for unpaid tax. Remember, tax evasion is a serious matter and in extreme cases can lead to a prison sentence.

To see the exact amount you would pay for a property see the Stamp Duty Calculator

 

 

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