Stamp duty bands – what rate will you pay?

A record £13bn of stamp duty tax receipts were collected by HMRC last year according to analysis by Coventry Building Society. Your contribution depends on the stamp duty bands that apply to you, your property type and your circumstances.

Stamp duty is charged when you buy a property or land that is valued at more than the minimum tax threshold for your country. Use our stamp duty calculator to see how much stamp duty you will need to pay if you’re buying a house.

Some bills can run into the tens of thousands of pounds, so it’s really important to work out what your stamp duty bill will likely be before deciding how much you are willing to spend on your new home.

What are the different stamp duty bands in England, Wales, Scotland and Northern Ireland for a main residence?

Stamp duty bands for your main residence ‒ classed as the home which you live in the most ‒ work slightly differently across the various countries that make up the United Kingdom.

Let’s look at England and Northern Ireland first

The threshold at which stamp duty kicks in is £125,001. If you buy a property worth £125,000 you pay no stamp duty.

After that, your bill is calculated by applying the tax rate to the portion of the purchase price that falls within the stamp duty band.

So for example, if you bought a property for £200,000, you would not pay stamp duty on the first £125,000 of that purchase, only on the £75,000 that falls within the 2% stamp duty tax band.

The Scottish system is called Land and Buildings Transaction Tax (LBTT). These are the bands and corresponding rates in Scotland.

In Wales the system is called Land Transaction Tax (LTT).

While the stamp duty bands are set at different levels for Scotland and Wales, the tax itself works in much the same way. You will pay tax based on how much of the purchase price falls within the relevant tax band,
First-time buyers may be exempt from paying stamp duty depending on where they buy a home and how much it costs.

Image credit: Future PLC/Colin Poole

How do stamp duty bands change for a second home?

In April 2016, the government brought in an additional stamp duty charge that would apply to buyers of second homes or buy-to-let properties.

Part of the reason for the introduction of the additional stamp duty levy was to dampen the appetite of buy-to-let investors who often compete with first-time buyers for the cheapest homes.

Matthew Todd, national technical tax and advisory manager at RSM UK, explains: ‘When buying a second home, a flat higher-rate surcharge is added to your stamp duty bill. In Scotland this is known as the additional dwelling supplement.’

‘This surcharge is 4% in Scotland and Wales, and 3% in England and Northern Ireland. This surcharge applies to people buying second homes or buy-to-let properties, as well as companies that buy residential properties. The surcharge will not apply to households who are replacing their main homes, regardless of any other property interests that may have.’

How do I work out my stand duty band?

Working out your stamp duty band, and therefore what your stamp duty bill is likely to be, is relatively simple.

Let’s say you are an existing homeowner who is moving house, and the house you are buying is priced at £300,000. Breaking your purchase price down into the stamp duty bands, your bill would be:

0% on the first £125,000 ‒ £0

2% on the portion between £125,000 and £250,000 ‒ £2,500

5% on the portion between £250,000 and £300,000 ‒ £2,500

That means a total stamp duty bill of £5,000.

If you’re buying the property, in England, as a second home or a buy-to-let investment, then you will need to add an extra 3% to each band. This would therefore be:

3% on the first £125,000 ‒ £3,750

5% on the portion between £125,000 and £250,000 ‒ £6,250

8% on the portion between £250,000 and £300,000 ‒ £4,000

As a result, you would have a total stamp duty bill of £14,000.

Remember, in Scotland and Wales the surcharge is 4%.

There may be occasions where you inadvertently own two properties simultaneously, without planning a move into buy-to-let or holding a holiday home. Will this mean a higher tax bill?

Andrew Montlake, director of mortgage broker Coreco, explains: ‘Some homebuyers might find themselves inadvertently owning two homes at once because the purchase of their new home has completed before their old home has sold. Don’t worry, if you find yourself in this situation you have up to three years to sell your old home and apply for a stamp duty refund.’

What is the progressive stamp duty rate system?

The UK moved to a progressive stamp duty system in December 2014. It follows the same principles as income tax.

Using the example of income tax, someone who earns £51,000 and therefore just tips into the higher rate tax band does not pay the 40% higher rate of tax on their whole salary, just the part which exceeds £50,270.

That’s how progressive stamp duty works. You only pay higher tax rates on the portion of your property that falls within the corresponding stamp duty bands.

Before the 2014 reformation, stamp duty bills were worked out using a slab system where one percentage rate was applied to the entire purchase price. So if your purchase price edged into a higher stamp duty band, it meant the higher rate was charged on the full amount you were paying.

The progressive system was introduced as it is generally considered to be a fairer set up for a tax like stamp duty.

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