Stamp Duty Explained – Everything you need to know about Stamp Duty in the UK

Written on 5 October 2020 by Courtney Manton in Frequently Asked Questions


Residential property in of Belgravia, Mayfair, Knightsbridge and Kensington continues to be sought after. However, a luxury home in one of London’s golden postcodes comes with a hefty price tag with average property prices around £3.7 million (source: Rightmove). When you are paying this amount for a property the associated bill for stamp duty will be substantial.

Anyone looking to purchase property in the area should understand how the tax works and how much they are likely to pay. Whether you’re moving house, buying a home for the first time or looking to purchase a second property, read on for our complete guide to stamp duty.

stamp duty belgravia

What is stamp duty?

When you buy a property or land you usually have to pay tax on it. In England or Northern Ireland this tax is called Stamp Duty Land Tax.

In response to the Covid-19 pandemic, Chancellor Rishi Sunak introduced a temporary stamp duty exemption on transactions tax of up to £500,000. This stamp duty holiday will last until 31st March 2021. Previously, the threshold at which homebuyers started paying stamp duty was set at £125,000.

In April 2016, the government imposed an extra 3% stamp duty surcharge on second property purchases. Outside the stamp duty holiday period, different rules apply for first-time buyers purchasing a property costing £500,000 or less.

From 1st April 2021 overseas buyers will have to pay a 2% surcharge on all stamp duty rates.

How Much Will I Pay?

Stamp duty rates vary depending on the purchase price of the property. There are several rate bands for Stamp Duty. The tax is calculated on the part of the property purchase price falling within each band.

The table below shows the stamp duty rates which will apply to property purchases completed by 31st March 2021.

Property Value SDLT Rates
Up to £500,000 0%
£500,001 – £925,000 5%
£925,001 – £1,500,000 10%
From £1,500,001 12%

 

Rightmove puts the average price of properties in Eaton Square, Belgravia at £4,093,750 over the last year. If you buy a property for this amount for before 31st March 2020 as your main residence, you will pay the following in Stamp Duty:

  • 0% on the first £500,000 (£0)
  • 5% on the amount between £500,001 and £925,000 (£21,250)
  • 10% on the amount between £925,001 and £1,500,000 (£57,500)
  • 12% on the remaining £2,593,749 (£311,250)
  • Total SDLT = £390,000

You can use the HMRC’s Stamp Duty Calculator to work out how much stamp duty you’ll have to pay on your property purchase.

From 31st March 2021 the old rates will apply:

Property Value SDLT Rates
Up to £125,000 0%
£125,000 – £250,000 2%
£250,001 – £925,000 5%
£925,001 – £1,500,000 10%
From £1,500,001 12%

 

First-Time Buyers’ Relief

stamp duty uk

Outside the stamp duty exception period, first-time buyers in England and Northern Ireland benefit from tax relief on stamp duty.

First-time buyers purchasing a property worth up to £500,000 pay 0% SDLT on the first £300,000 and pay 5% on the portion between £300,001 and £500,000. First time buyers purchasing property for more than £500,000 will not be entitled to any relief and will pay SDLT at the standard rates.

Stamp Duty on Second Homes

From 1 April 2016 stamp duty rates rose higher for buy-to-let investors and second homeowners in England, Wales and Northern Ireland who must pay an extra 3% stamp duty on each band, no allowance is made on the initial £125,000. This extra charge also applies to overseas buyers.

If you buy a new primary residence, but there’s a delay in selling your previous primary residence, you’ll have to pay the higher Stamp Duty rates as you’ll now own two properties. However, you may be able to get a refund if you sell your previous main home within 36 months.

The table below shows the stamp duty rates for second homes applicable to property purchases completed by 31st March 2021.

Property Value SDLT Rates
Up to £500,000 3%
£500,001 – £925,000 8%
£925,001 – £1,500,000 13%
From £1,500,001 15%

 

If you were buying the property in Eaton Square, Belgravia (purchase price of £4,093,750) as a second home or a buy-to-let investment then the cost of the stamp duty would be:

  • 3% on the first £500,000 (£15,000)
  • 8% on the amount between £500,001 and £925,000 (£34,000)
  • 13% on the amount between £925,001 and £1,500,000 (£74,750)
  • 15% on the remaining £2,593,749 (£389,062)
  • Total SDLT = £512,812

From 31st March 2021 the old rates for second homes will apply:

Property Value SDLT Rates
Up to £125,000 3%
£125,000 – £250,000 5%
£250,001 – £925,000 8%
£925,001 – £1,500,000 13%
From £1,500,001 15%

 

When is Stamp Duty not payable?

There are some circumstances when stamp duty is not payable.

In the event of divorce or separation, there is no stamp duty to pay on a property being transferred to your ex-spouse or partner. If you transfer the title deeds of your house to someone else, either as a gift or in your will, they won’t have to pay stamp duty on the market value of the property.

However, if you exchange properties with another person, you will each have to pay Stamp Duty on the property you receive based on its market value.

Can I Reduce the Stamp Duty I Pay?

stamp duty land tax

If the vendor includes items such as wardrobes, carpets and white goods (these are called moveables) in the sale price you can arrange to buy these for a reasonable price and deduct the cost from the purchase price. Your conveyancing solicitor will advise you about this.

If the price is only just within a higher band, you could ask the seller or estate agent if they would accept a slightly lower price.

What If I’m An Overseas Buyer?

The stamp duty surcharge for overseas buyers was announced in the October 2018 budget and was the subject of consultation during 2019. Draft legislation published in July 2020 confirms that an extra 2% levy will be added to all stamp duty rates for non-UK resident homebuyers. This surcharge will take effect from 1st April 2021.

How To Pay Stamp Duty Land Tax

You have 14 days from completion date to file your stamp duty return and pay (previously the time limit was 30 days). If you don’t pay in time, you could be fined.

In most cases, the solicitor carrying out your conveyancing will pay the tax on your behalf at completion and add the amount to their fees. They’ll also claim any relief you’re eligible for, such as if you’re a first-time buyer. However, it is your responsibility to ensure that the stamp duty is paid.

 

There is a shortage of property for sale in and around Belgravia. We are, therefore, confident that stamp duty will not deter UK and overseas professionals from investing in this exclusive part of London.

If you require an up to date valuation of your prime central London property, contact Best Gapp today. Our team of valuation specialists will be happy to give you an up to date sale or rental value of your property.

Courtney Manton

Courtney is a Chartered Surveyor, the senior partner and owner of the Best Gapp group.

His special talent honed over the last 30 years is winning. Winning for his many clients.

Winning a Leasehold Enfranchisement case, winning a negotiation to sell or buy, winning a lower rent at review, winning a planning permission to enhance value, winning trust.

All articles by Courtney Manton

RELATED ARTICLES


How to Deal With Damp and Mould in Rented Property – Who’s Responsible? Tenant or Landlord?
7 September 2020

Is mould or damp forming in your property? This article offers tips on how to deal with both.

Read more
How to Work Out and Calculate Rental Yield for UK Properties
3 August 2020

Beautiful Belgravia with its splendid Regency terraces, gorgeous garden squares and tranquil feel, will always be appealing to tenants with a big budget and a yearning for city living. Changes to the rules around buy to let over the past few years, including the 3% stamp duty surcharge on second homes, have made it less […]

Read more

Contact Us

+44 (0)20 7730 9253
81 Elizabeth Street, London SW1W 9PG

Get in Touch