Stamp Duty

What is stamp duty?

Stamp duty is the tax that the government places on the purchase of property in the UK. There’s similar duty on property purchases worldwide, and we call it stamp duty here in the UK.

When buying a house, you will pay a tax if it’s valued more than the minimum amount stated as the current government threshold. The amount typically begins at 5%, but there’s a scale which we’re going to touch on. Stamp duty is payable to HMRC and, interestingly enough, it’s been around since the 1690s.

What are the current stamp duty thresholds for residential properties?

We’re recording this episode in February 2025 and the current threshold is 0% for properties up to the value of £250,000.

From £250,001 up to £925,000, stamp duty is 5% of the purchase price. Above that, between £925,001 up to £1.5 million, it’s 10% of the purchase price.

Finally, anything above £1.5 million is taxed at 12% . At the top end of that scale there’s some big business for HMRC.

But this is all going to change in April from this year. The thresholds are going to be changing, and we will talk about that in a moment.

How is stamp duty calculated?

It’s charged as percentages of the purchase price based on the thresholds I just mentioned. It’s important to note that there are certain exemptions – and on the flip side of that, there is also additional stamp duty to pay for people with more than one property, which we’ll cover shortly.

When remortgaging, do you have to pay stamp duty?

No, it’s a levy placed on property purchases. Once you’ve paid the stamp duty on your property, you won’t be charged again for that property, even if you remortgage.

Do I have to pay stamp duty on a second home?

Yes and in fact, the thresholds are even tighter on purchasers of second homes. If the second home is valued between £40,000 and £250,000, it’ll be 5% stamp duty.

If you think of landlords looking to build portfolios of Buy to Let properties, there’s a lot of tax to pay when purchasing multiple properties.

Do First Time Buyers pay stamp duty?

Yes, but only on properties valued at over £450,000. There’s still an exemption for First Time Buyers below that threshold. But from April this year, which isn’t far away, this threshold is going to be dropping from £250,000 down to £300,000.

So that will hit many First Time Buyers, particularly in parts of southern England where prices are a bit higher. More people will be paying stamp duty once that threshold drops.

Is stamp duty applicable on gifted properties?

Stamp duty will not usually apply to any property which has changed hands by way of a gift, or where there’s no ‘chargeable consideration’ as they call it officially.

There are other potential taxes that might arise from such gifts – like inheritance tax, for example, if the person making the gift dies within seven years. But stamp duty is not charged in these types of circumstances.

Do shared ownership properties incur stamp duty?

It works slightly differently with properties bought under the shared ownership scheme – or in Northern Ireland, the Co-ownership Scheme.

If you’re not a First Time Buyer and the property is over the £250,000 threshold, you can decide whether to pay the stamp duty on the full value of the property from the outset. People might prefer to do this to get it over and done with, so they don’t have any bills further down the line.

Or, you can simply pay the stamp duty on the proportion that you’re buying under the scheme. You then pay the balance once you buy the remainder of the property in future. It depends on whether you’ve got the funds to do it initially and just get it done, or you prefer to pay a little bit now and then the balance later.

How do changes in government policy affect stamp duty?

The latest budget was announced in the autumn of 2024. Some measures kicked in immediately, but the stamp duty change isn’t starting until April 2025.

From then, the £250,000 threshold will reduce to £125,000 and there’ll be a 2% levy on properties valued between £125,000 to £250,000. It will have an effect on purchasers who are already stretched with the ongoing cost of living increases – and the general economic turmoil we’ve been living with for the past several years. The new government brought this scheme in to try to raise funds.

When do you have to pay stamp duty?

It’s usually handled by the solicitor. The customer will receive their legal bill from the solicitor, and that includes the stamp duty. Make sure that you have budgeted for that from the beginning, so you have the funds to pay the stamp within 14 days of exchanging contracts.

Are there any exemptions from paying stamp duty?

There’s an exemption for First Time Buyers on properties under £450,000, but that’s reducing to £300,000 from April. There’s also an exemption with gifted properties, as we touched on earlier.
Additionally, there’s something called the three-year rule. This would apply if you had bought a second property and subsequently sold your original property.

For example, let’s say you have a home and you’ve just bought a second property and paid additional stamp duty on it. If you happen to sell your main residence within three years of the second purchase, you could potentially be able to claim back the additional stamp duty you paid for the second property.
This only applies to selling your main residence – and not to portfolio landlords with multiple Buy to Let properties. If they sell, they can only claim stamp duty back if they sell their main residence.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS