Stamp duty is a tax that is levied on certain financial transactions in the UK. The most common type of stamp duty is levied on the purchase of property, but it can also be charged on the transfer of shares, the sale of land, and other transactions. Stamp duty is generally paid by the buyer of the property or shares, but in some cases, it may be paid by the seller. The amount of stamp duty that is payable depends on the value of the property or shares being transferred. In most cases, stamp duty must be paid within 30 days of the transaction. Failure to pay stamp duty can result in fines and penalties.
UK Chancellor of the Exchequer Kwasi Kwarteng’s mini-budget announcement included the much-anticipated stamp duty cut, an attempt by Prime Minister Liz Truss to stimulate economic growth.
Why do we pay stamp duty on houses?
In the UK, stamp duty is a tax that is paid on the purchase of property. The amount of stamp duty that is payable depends on the value of the property, with higher values attracting a higher rate of tax. There are different rates for residential and commercial property, and for first-time buyers and second-time buyers. Stamp duty is collected by HM Revenue & Customs and goes towards funding public services such as health, education and defence. It is seen as a way of ensuring that those who benefit most from the UK’s public services contribute to their funding. Paying stamp duty on a house purchase is therefore seen as a way of contributing to the UK’s public finances.
What are the Stamp Duty Land Tax (SDLT) rates ?
In the UK, you usually have to pay Stamp Duty Land Tax (SDLT) when you buy a residential property. The amount of tax you pay depends on the value of the property and whether it’s your main home. If you’re buying a second home or an investment property, you’ll usually have to pay more tax.
Rates for a single property
The rates before 23 September 2022 were: 2% on properties worth up to £125,000, 5% on properties worth up to £250,000, 10% on properties worth up to £925,000, 12% on properties worth up to £1.5 million, and 15% on anything above that. If you’re a first-time buyer, you may not have to pay any tax on properties worth up to £300,000.
For more information about Stamp Duty Land Tax, please visit www.gov.uk/stamp-duty-land-tax.
Use the SDLT calculator to work out how much tax you’ll pay.
Use the SDLT calculator to work out how much tax you’ll pay.
Stamp Duty Land Tax
You can also use this table to work out the SDLT for the purchase price of a lease (the ‘lease premium’).
| Property or lease premium or transfer value | SDLT rate |
|---|---|
| Up to £250,000 | Zero |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
Example
In October 2022 you buy a house for £295,000. The SDLT you owe will be calculated as follows:
- 0% on the first £250,000 = £0
- 5% on the final £45,000 = £2,250
- total SDLT = £2,250
If you’re buying your first home
You can claim a discount (relief) if the property you buy is your first home. This means you’ll pay:
- no SDLT up to £425,000
- 5% SDLT on the portion from £425,001 to £625,000
You’re eligible if you and anyone else you’re buying with are first-time buyers.
Expert’s Comments
Jatin Ondhia, CEO, Shojin:
““The property market is undoubtedly integral to the UK economy, and its value extends far beyond SDLT tax receipts for the Government, given what it means for developers, investors, agents and service providers. Once again, as turbulence has struck, the Government has reacted quickly to support the market, just as they did with the Covid-19 stamp duty holiday.
“It will be interesting to see what impact this has from an investment perspective. For instance, we have seen retail investors deterred from buy-to-let purchases due to higher tax bills, but will this SDLT cut offer enough incentive to reverse that trend? I am not sure – the complexity and high cost of traditional property investment continues to alienate many, so we could see more people go down alternate routes, like fractional investing in real estate.”
Paresh Raja, CEO, Market Financial Solutions:
“One of Whitehall’s worst kept secrets this week, the confirmation of the stamp duty cut, is nonetheless significant. Like Johnson and Sunak’s actions during the pandemic, today’s mini budget underlines the new-look Government’s determination to maintain a buoyant property market.
“But the true impact of this move remains to be seen. One common theme of the stamp duty holiday in 2020-21 was that sellers inflated asking prices to account for buyers’ stamp duty savings. Will we see the same again? It is likely, to an extent at least. But this time around we have rising interest rates impacting the amount buyers can borrow, so that will also shape the way that house prices move.
“I think more action should have been taken to incentivise developers, investors and homeowners to improve properties’ sustainability. Buyers and renters want greener homes, while the energy price crisis has demonstrated the need to improve how energy efficient buildings are. So, further financial incentives to encourage owners to lower the carbon footprint of their property would have made perfect sense at this time. We should expect this to be a recurring theme in the months to come.”
Nicholas Hyett, Investment Analyst at Wealth Club
“In what is probably the most pro-business budget this century, the Chancellor has acted to support Britain’s “unbounded entrepreneurial drive”.
Confirmation that the VCT and EIS schemes will continue, a long overdue extension to the SEIS scheme and initiatives to unlock money from the UK’s pension schemes all provide fuel to support an entrepreneurial fire that is already burning bright. Small innovative businesses are key to the government’s 2.5% economic growth target, and creating the high value jobs that will drive wealth creation more broadly.
There is still plenty of work to do, with the government planning radical supply side reform as well as dramatic changes to the tax system. Those are no easy tasks, but the government clearly recognises the importance of a thriving private sector and the crucial role entrepreneurs play in building a successful economic future.”
Howard Cox of FairFuelUK,
“Liz Truss and Kwasi Kwarteng should hang their fiscal heads in shame by not cutting Fuel Duty. Frankly this is the economics of an asylum. Their ignorance is jaw dropping!
Low income familes, small businesses and the economy will continue to be crippled by high pump prices, punitive fuel duty levels and opportunistic profiteering in the fuel supply chain. Neither have been addressed by this continuing atypical Tory administration.
I am disgusted that yet again drivers are being used as the Government’s cash cows. No promise of keeping Rishi Sunak’s 5p cut in duty and not matching the significant fuel duty cuts across Europe.
It seems the Prime Minister is to continue Boris Johnson’s anti driver policies and grass root voters who rely on their vehicles to survive.
Net Zero will bankrupt the UK and the nation’s drivers will remail one of the highest taxed in the world on the back of a virtual signalling green ideal.
No reduction in Fuel Duty means the economic trend growth aspiration of 2.5% per year is unlikely to be hit. It can’t be achieved without lower business costs. One of the largest is the price of transportation that significantly impacts on inflation and the cost-of-living crisis for all of us.
Cutting the cap on bankers’ bonuses may attract more financial companies and investment in the UK. But cutting the costs of transport will attract manufacturers and other businesses to work from the UK, too. It really is a no brainer. Why has the Government failed to recognise that for decades and is continuing to do so?
Inflation fell by 0.3per cent last month. The reason for this welcome drop, despite food prices still climbing, is almost entirely due to a 10p fall in pump prices in August.
Making a big cut in fuel duty would drive inflation down immediately and it could have been done by using the extra £3 billions in VAT the Government has received from recent very high pump prices. It would have reduced the huge burden on families and businesses and also boosted tax revenue to the Exchequer from the growth in the economy that would have come as a result.
Liz Truss ignores drivers views at her peril. Voters will leave the Tory Party in their millions.
The Opinion Poll below sums up their views perfectly.”
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown:
“The horrendous cost of buying a house just got cheaper – at least for now. The stamp duty cut will ease some of the pressure on buyers right now. It’s particularly welcome as house prices rocket and interest rates continue to climb. But in the medium-term, it risks making life even harder.
This is the Treasury’s reaction to rising interest rates, which it is worried will squeeze the life out of the housing market. Higher mortgage rates and higher property prices form a toxic cocktail, that risks killing off demand. For buyers facing forking out thousands of pounds right now, it’s a welcome change.
However, there’s every chance that the change doesn’t drain the toxic cocktail, it just remixes it. Structural changes in stamp duty aren’t guaranteed to stimulate demand. When relief was introduced for first time buyers, the government assessed the impact the following year. It found that most of those who took advantage were going to buy anyway, so it only increased demand by around 1,000 transactions in the first 13 months. Given the costs involved, that worked out as a cost to the Treasury of around £160,000 per extra transaction. It was also calculated to have decreased the cost of buying by up to 0,5 percentage points, but increased prices by up to 0.7 percentage points – wiping out any cost saving for buyers.
Even if the change does persuade more people to buy, a shortage of buyers isn’t the biggest problem facing the property market right now , the real brake on the property market is a severe shortage of supply, because the average agent only has 36 properties on the books. Stimulating demand without addressing this just risks pushing prices higher. Higher prices coupled with higher mortgage rates are going to push properties further out of reach for millions of people, which could in itself end up scuppering sales. The property market is a delicate beast, and tinkering with tax incentives always risks producing a result you weren’t fully expecting.”
Nathan Reilly, Director of Customer Relationships at Twenty7tec says of today’s stamp duty announcement:
“By cutting stamp duty to energise the housing market, the Chancellor is borrowing from the Rishi Sunak playbook. When we saw this in 2021, we had incredible volumes of new business in the housing sector, and some of the busiest times in living history for mortgage advisers and lenders.
“The context is clearly different this time – with a different macroeconomic picture for both interest rates and inflation – but Kwarteng and Truss will be hoping that the house buying market can play a major role in the UK’s near-term economic growth.
“The mortgage market is currently increasingly reliant on the remortgage market, and a stamp duty change is likely to rebalance this back towards a purchase-driven market again.”
Giles Coghlan, Chief Market Analyst HYCM, said:
“The mini-budget comes at a time when the government is trying to balance support for consumers and businesses with measures that might trigger further inflation, whilst also trying to reinvigorate a stagflationary economy.
“For investors, inflation poses the biggest threat to their portfolios, which the Prime Minister’s new emergency energy bills package should somewhat ease in the short-term. However, such a large fiscal package could contribute to elevated prices in the medium to long term that could inflict further damage to an economy and currency that are already on their knees. By cutting VAT, corporation tax and even beer duty, it’s clear that Truss and Kwarteng are committed to encouraging growth and supporting businesses who are struggling to meet the demands of a worsening cost-of-living crisis. Further tax cuts for consumers, in addition, should provide a welcome boost to their spending power as.
“That said, while the effect of these measures is likely to provide a temporary relief for the next few months, investors will be concerned that not enough is being done to power growth and economic resilience for the longer term.”
