Stamp Duty Explained – Everything You Need to Know About Stamp Duty in the UK

Written on 29 November 2021 by Courtney Manton in Frequently Asked Questions


Residential property in 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.

stamp duty guide

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.

What is stamp duty?

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

Different rules and rates apply depending on whether you are buying a new main residence or a second property and whether you are a first-time or overseas buyer. 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.

How Much Will I Pay?

Stamp duty rates vary depending on the purchase price of the property. The table below shows the stamp duty rates that will apply if the home you are buying will be the only residential property you own.

  Property Value SDLT Rates
  Up to £125,000 0%
  £125,001 to £250,000 2%
  £250,001 – £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. If you buy a property for this amount as your only residence, you will pay the following in Stamp Duty:

  • 0% on the first £125,000 (£0)
  • 2% on the amount between £125,001 and £250,000 (£2,500)
  • 5% on the amount between £250,001 and £925,000 (£33,750)
  • 12% on the remaining £2,593,749 (£311,250)
  • Total SDLT = £405,000

First-Time Buyers’ Relief

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 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.

The surcharge is payable if you buy your new home before selling your previous one. For instance, if you are struggling to sell your home, or your sale has fallen through, you may decide to buy your new home before selling your old one. However, you may be able to get a refund if you sell your previous main home within 36 months.

  Property Value SDLT Rates
  Up to £125,000 3%
  £125,001 to £250,000 5%
  £250,001 – £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 £125,000 (£3,750)
  • 5% on the amount between £125,001 and £250,000 (£6,250)
  • 8% on the amount between £250,001 and £925,000 (£54,000)
  • 13% on the amount between £925,001 and £1,500,000 (£74,750)
  • 15% on the remaining £2,593,749 (£389,062)
  • Total SDLT = £527,812

Stamp Duty for overseas buyers (non-UK residents)

Non-UK residents must pay a 2% stamp duty surcharge on the purchase of a residential property. The surcharge is in addition to the 3% surcharge on the purchase of second homes.

A buyer is a UK resident if they have spent 183 days or more in the UK over 365 consecutive days, beginning 12 months before the transaction and ending 12 months after.

Stamp duty exceptions

There are some circumstances when stamp duty is not payable.

  • If the property is left to you in a will
  • If the property is given as a gift with no money or other payment changing hands
  • If the property is being transferred to your ex-spouse or partner in the event of a divorce or separation

Can I Reduce the Stamp Duty I Pay?

Suppose 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.

How To Pay Stamp Duty Land Tax

You have 14 days from the 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

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