Stamp Duty Land Tax (SDLT) is a tax that is payable when you buy property or land over a certain cost threshold in England. Here, we've summarised how to calculate stamp duty in England in 2023, and provided useful information on what stamp duty is, who pays it, and when it needs to be paid.
Please note that we are not tax advisers and while we have made every effort to ensure the information in this blog is up to date, it is for informational purposes only. It is not intended to replace impartial tax advice from a qualified adviser.
The Stamp Duty System
SDLT is a tax that is paid by anyone who purchases property or land over a certain value threshold. It is designed for the government to raise revenue and discourage people from buying property that is beyond their means.
Stamp duty payable applies to any property transaction including freehold and leasehold properties, shared ownership schemes, and property transfers.
The stamp duty rate can change in the UK, but it typically doesn't happen very frequently. The government may make changes to stamp duty rates in response to economic events or policy changes, so it is always a good idea to stay up to date on any potential changes that may happen in the future. The stamp duty rate is a significant consideration along with the property purchase price.
Who must pay stamp duty?
Anyone who purchases a property or land over a certain price threshold is required to pay Stamp Duty.
The current threshold when buying a residential property is £250,000. However, first-time buyers may get a discount (stamp duty relief) meaning they pay less or no tax if they meet certain criteria.
How much does stamp duty cost in 2023?
The total amount of Stamp Duty you need to pay is determined by several factors such as the type of property you are buying (residential, non-residential, or mixed-use) and whether you are a first-time buyer or buying an additional property.
For a full run down of stamp duty costs, see gov.uk
When do you pay stamp duty?
If you are required to pay Stamp Duty, you must do so within 14 days of completing your property or land purchase. You or your conveyancing solicitor can file and pay SDLT for you and add the amount to their fees. If you are eligible for any stamp duty relief, such as that afforded to first-time buyers, they can also claim this for you.
In England, you'll have to pay Stamp Duty if you purchase a freehold property, acquire a new or existing leasehold property, or buy property through a shared ownership scheme.
What are the other tax considerations when purchasing a property?
When it comes to purchasing property in the UK, it's important to understand the tax implications. In England and Northern Ireland, Stamp Duty Land Tax (SDLT) applies to property purchases above a certain price threshold, whereas in Scotland, you'll pay Land and Buildings Transaction Tax (LBTT) and in Wales, Stamp Duty Land Tax was replaced by Land Transaction Tax (LTT) from April 2018.
Stamp DutyTax is calculated based on the value of the property you are buying and whether it is a residential, non-residential or mixed-use property. On the other hand, Land and Buildings Transaction Tax and Land Transaction Tax are based on a different set of thresholds and percentages.
Other taxes to consider when purchasing a property include:
Council Tax
Capital Gains Tax (CGT)
Value Added Tax (VAT)
For buy to let properties
Stamp Duty Land Tax (SDLT) for buy-to-let properties works differently than for residential properties. Since April 2016, there has been an additional 3% Stamp Duty charge for those purchasing second homes or buy-to-let properties in England and Northern Ireland.
This means that if you are purchasing a buy-to-let property, you will pay a higher rate of Stamp Duty than if you were purchasing a residential property for your own use.
Stamp Duty rules for non UK residents
Starting from April 2021, individuals, trusts and companies that are not UK residents are mandated to pay an extra 2% surcharge on the Stamp Duty Land Tax (SDLT) when buying residential property in England and Northern Ireland. It is essential to note that this is on top of the prevailing standard rates of Stamp Duty that apply to all purchases of residential properties.
To be qualified as a non-UK resident and subject to the Stamp Duty surcharge, you must have spent less than 183 days in the UK in the 12 months leading to the property transaction date. However, it is important to note that the 2% surcharge only pertains to the acquisition of residential property and not land or commercial property.
As the Stamp Duty rates and thresholds for non-UK residents are subject to change over time, it's advisable to confirm the current rates and guidelines before committing to any property purchase decision. It's always a good idea to seek professional tax advice from qualified solicitors or tax professionals to guarantee you have a proper understanding of your tax obligations.
First time buyer relief & Stamp duty tax
Effective from September 22nd, 2022, first time buyers purchasing a home up to the value of £425,000 in England or Northern Ireland will be exempted from paying stamp duty. Consequently, if the value of the property you are purchasing is between £425,001 and £625,000, you will only pay a 5% stamp duty on the amount exceeding £425,000. For instance, a first time buyer buying a home for £500,000 will have to pay a stamp duty of £3,750, which is 5% of the amount above the £425,000 relief.