Stamp Duty explained for first time buyers

Purchasing a new property can come with lots of extra expenses that many people might not factor in to their budget. One of these expenses is stamp duty. Once upon a time, stamp duty was not something first time buyers were required to pay (up to £250,000), but things have changed!

So what is stamp duty and how much will you, the first time buyer, need to pay? In this article, we’ll be explaining stamp duty for first time buyers.

What is Stamp Duty?

Stamp duty, or Stamp Duty Land Tax (SDLT), is a payable tax on property purchases in England and Northern Ireland. The Stamp Duty fee that you will be required to pay depends on the value of the property you are purchasing.

Do I need to pay Stamp Duty?

You will be required to pay stamp duty if you are purchasing a property over £125,000. The higher the price of the property, the more stamp duty you will be required to pay.

How much is Stamp Duty?

The amount of Stamp Duty charged is calculated as a percentage of the price of your purchased property. This percentage varies depending on which stamp duty band you fall under.. Changes have made this process a lot more friendly to people buying properties, especially first time buyers.

Here is how stamp duty works today.

Stamp Duty Band - Level 1

On the first £125,000 you will pay zero stamp duty tax.

Stamp Duty Band - Level 2

On the next £125,000 you will be required to pay 2% stamp duty tax.

Stamp Duty Band - Level 3

Then the next £700,000 up to £925,000 you would be required to pay 5%.

So if, for example, you were to purchase a property for £325,000, you would pay nothing on the first £125,000. The next £125,000 you would pay 2%, which would be £2500. And on the remaining £75,000 you would be required to pay 5%, which would be £3750. So in total, you would be required to pay £6250 towards stamp duty.

However, if mathematics isn’t one of your strengths, there are several stamp duty calculators that you can find online, which can quickly tell you how much you will spend on the property you are interested in, to help you with your budgeting.

Best Stamp Duty (SDLT)( Calculator

There are a number of different stamp duty calculators that can be found online, most of which do exactly the same thing. It is important to double-check whether your Stamp Duty Calculator is reflective of current HMRC SDLT laws.

The most reliable stamp duty calculator is available on the HMRC website.

Other reliable websites provide simplified calculators, a few examples of these are;

When do you pay Stamp Duty Land Tax?

A Stamp Duty Land Tax (SDLT) return must be filed and paid within 14 days of the property purchase being completed.

Previously, you would have been required to pay your stamp duty within 30 days, but this rule changed as of the 1st of March 2019.

How do I pay Stamp Duty?

In most cases, your solicitor will deal with the payment of stamp duty upon completion of sale, but you can pay stamp duty tax yourself.

For more information on how to pay stamp duty land tax, visit https://www.gov.uk/guidance/pay-stamp-duty-land-tax.

Do I have to pay or can I avoid stamp duty?

Yes, you do have to pay Stamp Duty as it is a legal requirement.

It may be tempting to try, but it is not wise to try avoiding stamp duty. You may come across websites, or even people, who claim to be able to show you how to avoid stamp duty but do not allow yourself to be convinced as this can come with repercussions.

What happens if I don’t pay Stamp Duty tax?

Non-payment of Stamp Duty tax will result in a late penalty fee that depends on how late the documents are submitted, the SDLT late fee is calculated as follows;

If your stamp duty payment is late by up to 12 months, you will be charged 10% of the duty, capped at £300
If your stamp duty payment is late by 12 - 24 months, you will be charged 20% of the duty
If your stamp duty payment is late by over 24 months, you will be charged 30% of the duty

Interest is also charged on Stamp Duty late payments. This is calculated from the date that the payment should have been made, up until the date that it is paid in full. The interest fee varies based on how much stamp duty you owe and how late the payment is.

The official rate set by the HM treasury official is used to calculate your interest fee. Fortunately, you do not need to pay this if the amount is less than £25.

Can I appeal against Stamp Duty late fees?

Yes, you can appeal against the late fees in exceptional circumstances and on the condition that you can provide evidence to HMRC. Each case will be considered but some examples of successful appeals are;

The document reaching HMRC late is as a result of fault by the Post Office or other document carriers.
The document arriving late as a result of reasonable issues pertaining to your solicitor, e.g;
- Your document was destroyed in a fire or other natural disaster affecting your solicitor's office
- Your solicitor is taken ill
- Your solicitor passes away

Stamp Duty for first time buyers

HMRC offer stamp duty relief for first-time buyers which allows you to claim back stamp duty fees providing your first property is under the value of £300,000. If your property is above this amount, you will be required to pay 5% on the portion from £300,001 to £500,000.

If your first property purchase is above £500,000, you will not be eligible for a stamp duty discount and will be required to pay stamp duty as normal.

If you are married and intend to jointly purchase a property, you must both be first time buyers in order for you to be eligible for first-time buyers stamp duty relief. If you are not married, you can still get a refund for stamp duty providing the only person on the deed to the mortgage is a first-time buyer. However, this can affect the amount that your mortgage provider would be willing to lend you.

Stamp Duty Scotland

Scottish stamp duty, or at least it's equivalent, is called Land and buildings transaction tax (LBTT). LBTT was introduced in order to replace stamp duty UK legislation.

Land and buildings transaction tax is calculated similarly to UK Stamp duty with different tax bands based on the purchase price of the property. Below is a breakdown of the different LBTT bands;

LBTT rate of 0% on purchases up to £145,000
LBTT rate of 2% on purchases from £145,001 to £250,000
LBTT rate of 5% on purchases from £250,001 to £325,000
LBTT rate of 10% on purchases from £325,001 to £750,000
LBTT rate of 12% on purchases over £750,000

First time home buyers in Scotland will benefit from some Land and buildings transaction tax relief. This relief increases the 0% LBTT threshold from £145,000 to £175,000, resulting in the vast majority of Scottish first time buyers being exempt from LBTT.

There are several websites that will help you calculate LBTT, one example of a Scottish stamp duty calculator is provided by Which?

The best land and buildings transaction tax calculator (LBTT calculator) can be found on the Scottish government website

For further information on Scotland's Land and buildings transaction tax laws, please visit the LBTT information page.

Stamp Duty Wales

Welsh stamp duty is known as Land Transaction Tax (LTT) and is similar to UK Stamp Duty but, like Scottish LBTT, it has some key differences.

Welsh Land Transaction Tax (LTT) is payable if you buy a property over a specific price. There are 2 different sets of percentage rates that you could be charged based on your circumstances, these are the LTT Main rates and the Higher rates.

The main residential land transaction tax rate in Wales changes depending on the price of the property, as per the below;

LTT rate of 0% on purchases up to £180,000
LTT rate of 3.5% on purchases from £180,001 to £250,000
LTT rate of 5% on purchases from £250,001 to £400,000
LTT rate of 7.5% on purchases from £400,001 to £750,000
LTT rate of 10% on purchases over £750,001 to £1,500,000
LTT rate of 12% on purchases over £1,500,000

The higher residential land transaction tax rate in Wales changes if you buy a residential property worth £40,000 or more and already own 1 or more properties, the rate changes are as follows;

LTT rate of 3% on purchases up to £180,000
LTT rate of 6.5% on purchases from £180,001 to £250,000
LTT rate of 8% on purchases from £250,001 to £400,000
LTT rate of 10.5% on purchases from £400,001 to £750,000
LTT rate of 13% on purchases over £750,001 to £1,500,000
LTT rate of 15% on purchases over £1,500,000

The higher rates do not apply if you have sold the last main home you owned before, or on the day, you purchase your new home.

The best land transaction tax calculator (LTT Calculator) can be found on the Welsh LTT website

Fortunately for first time buyers in Wales, you do not need to pay LTT if you are buying a property for less than £180,000 as long as you do not own any other property.

Hopefully, you will now have a good understanding of stamp duty for when you purchase for your first property. For the most up to date information on stamp duty changes, it is advisable to check the following website; https://www.gov.uk/stamp-duty-land-tax.

If you’re still asking yourself “Do I need to pay stamp duty?” or if have any other questions or queries about buying your first property, we’d be happy to help you at Emoov.