Stamp Duty – what is it?
When you buy a residential property or land in either England or Northern Ireland and its value exceeds £125k, you will have to pay what’s known as Stamp Duty Land Tax – more commonly abbreviated by estate agents and mortgage brokers alike as simply stamp duty. So stamp duty – what is it and how will it affect you in getting your first home.
Now, it’s important that you understand the rules surrounding stamp duty, as it can really affect your affordability calculations.
Here we take a look at the main points you need to know in England, Wales, Scotland & Northern Ireland. Please note that Stamp Duty rules are changing on 31 Mar 25.
As we mentioned, land or property costing more than £125k in England and Northern Ireland incurs stamp duty, which means that you’ll pay nothing on the amount below that. On properties or land costing between £125,001 and £250k, you’ll pay 2% on the portion over £125k, with the next bracket being between £250,0001 and £925k and anything falling within it incurring 5% stamp duty. This applies on both leasehold and freehold properties, regardless o whether bought outright or with a mortgage.
The rules are different for second homes, with stamp duty kicking in at just £40k and charged at an additional 3% over and above the rates displayed below. And whilst these rules also apply in Wales and Scotland, they’ll be referred to by mortgage brokers as Land Transaction Tax (LTT) and Land and Buildings Transaction Tax (LBTT) respectively.
To put it into perspective, if you bought a home as your primary residence and the value was £300k, you would pay:
£0-£125k 0% = £0
£125,001-£250k 2% = £2,500
£250,001-£300k 5% = £2,500
Making a grand total of £5,000 in stamp duty.
First-time Buyer Stamp Duty Relief
In an attempt to make it easier for people to get onto the property ladder, the government helps first time buyers in England and Ireland by ensuring that stamp duty rates doesn’t kick in until £300k. This represents a saving of around £5k, which is just what you need when you’re setting out. For anything over this amount, the usual rates will apply.
Shared-Ownership Stamp Duty Relief
More stamp duty assistance is provided to first time buyers purchasing a home under the government’s shared ownership scheme whereby a person buys between 25% and 75% of their home and then pays rent on the remainder. In this instance, stamp duty relief extends up to the £500k mark, but again, we will talk you through how and where you are impacted.
There is, of course, much more to it than we’ve mentioned here, so if you’re in any way unsure about stamp duty before making a property purchase, it’s important that you seek professional mortgage advice.
Want to Know More?
Essentially, stamp duty is a fact of life when it comes to buying property and it needs to be fully understood by anyone making a house purchase or they risk a nasty surprise further down the line. As we’ve covered, there are incentives out there for those buying for the first time and with a great mortgage advisor in your corner, their knowledge can prove useful in minimising the impact of this mandatory charge.
At Yes Mortgage Services, we are a team of unbiased, impartial mortgage advisors and we make it our business to help you to find the ideal products for your needs, whether buying for the first time (check out our blog “The beginners guide to getting a mortgage” if this is you) or remortgaging. Unlike other mortgage brokers, we don’t charge any fees and we are flexible enough to come to you whenever it’s convenient – even if it’s in the evening.
So, if you’d like to find out more about stamp duty, mortgages or anything else, we’d recommend you have a search our this website, start a chat with us direct on the website or via our Facebook Page. There you’ll find lots of useful information about buying property. Alternatively, if you would like to book your free, no-obligation consultation, call us now on 0800 612 5595 and we’ll arrange a time that suits you and your schedule.
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