Please note: Stamp Duty rates and thresholds have changed several times since this article was written. Check the current rates on GOV.UK before you buy.
The creation of Stamp Duty land tax is a perfect way for Governments to raise a revenue. It is given to HM Revenue and Customs as part of the purchase of land or the buying of a home. As a rule, everyone is subject to it. However, there are a few exceptions to this rule. In unusual circumstances, such as economic downturns and pandemics, the collection of Stamp Duty land tax can be suspended. There are some cases where you can reclaim Stamp Duty. If you need to do so, then you would be wise to contact a specialist such as Sentient SDLT, who specialise in the recovery of Stamp Duty land tax when it is due back to you.
How Stamp Duty Rates Work
What are the rates that you are expected to pay when it comes to Stamp Duty land tax? There are two factors the tax is based on. The first is when you actually bought the property or land. The second is how much the property or land cost you in the first place. For example, if you buy a home for under £40,000, then you don’t pay Stamp Duty land tax. Instead, the rates are set on the following guidelines.
- If the property is below £125,000, then no Stamp Duty land tax is payable; however, it must still be declared if it is over £40,000.
- Any amount between £125,001 to £250,000 will be subject to a tax of 2% of the property’s value.
- Up to £675,000 (between £250,001 and £925,000) will be subject to a tax of 5% of the property’s value.
- The next £575,000 (between £925,000 and £1.5 million) will be 10%.
- Anything above £1.5 million will be taxed at 12%.
What That Means in Practice
To put that in perspective, the average house price in the UK is £264,000. Therefore you’ll pay £3,200 Stamp Duty land tax. However, if you were after somewhere that was £3 million, then you’d be looking at £273,750. So you’d end up paying in tax the above-average house price in the UK. You can see why the Government is keen on this line of tax revenue. You can also see why people might be interested in trying to claim some of it back.
Stamp Duty Holidays
Given that the housing market in the UK has been very good over the last 30 years or so, despite issues with the financial crash in 2008, the Government will look to protect the market as much as it can. This has resulted in a few Stamp Duty land tax “holidays” where people did not have to pay at all, or it was significantly reduced.