Taxes Payable When Buying Property in the UK
Taxes are usually the biggest amount payable when buying a property in the UK normally with a mortgage loan and are also payable on stock and share transfers. There are many myths surrounding these duties, so this site has the latest information.
Stamp Duty Rates are set by the government, then payable to HM Revenue and Customs (HMRC) on completion of a property transaction. The current percentages range from 0% (up to £125,000) to 12% for values over £1.5 million. Check the current table of rates payable.
These rates are fixed and are payable upon completion of a purchase of a property and the applicable amount will be deducted by your solicitor on your final account for conveyancing services. So what rates will you pay?
There are several types of rates payable on land-based transactions although most people are in stamp duty land tax payable on residential property sales.
- Stamp Duty Land Tax (SDLT) for residential property.
- SDLT for disadvantaged areas.
- SDLT on new residential leasehold purchases.
- SDLT on non-residential or mixed use properties.
- Stamp Duty on the sale of shares.
Stamp Duty Land Tax for Residential Properties
This is the tax that most people will pay when they buy another property. It is generally the purchaser who pays this tax via their solicitor although some sellers will pay this tax for you as part of a sale agreement.
The percentage you pay depends on the sale price of your property and is currently only payable on a sale value above £125,000 - the current rates are as follows:
The Chancellor of the Exchequer announced a radical change in the rates and structure during his 2014 Autumn statement.
Now the tax is only payable on the portion of the value in the bracket, and came into effect from Midnight 3rd December 2014.
For example; for a house sold for £300,000 the stamp duty payable is now £5,000 - (0% of £125,000 (£0) plus 2% of £125,000 (£2,500) plus 5% of £50,000 (£2,500) equals £5,000). Under the old system, the tax would have been £9,000, a substantial saving.
The following rates are applicable throughout 2016 until further notice of any change.
- Up to £125,000 - 0%
- Over £125,000 to £250,000 - 2%
- Over £250,000 to £925,000 - 5%
- Over £925,000 to £1,500,000 - 10%
- Over £1,500,000 - 12%
Scotland now has its own system. Calculate LBTT rates online
Rates last updated: 25th November 2015.
The previous rates were:
- Up to £125,000 - 0%
- Over £125,000 to £250,000 - 1%
- Over £250,000 to £500,000 - 3%
- Over £500,000 to £1,000,000 - 4%
- Over £1,000,000 to £2,000,000 - 5%
- Over £2,000,000 - 7%
Higher rates come into force from 1st April 2016 for buy-to-let properties and second homes. Click here for more information.
Latest News and Stamp Duty Changes
25th November 2015
New Buy-To-Let rates introduced.
27th April 2015
The Labour leader, Ed Miliband announced today that first-time buyers would pay no Stamp Duty on purchases up to £300,000. This Stamp Duty holiday would take effect under a Labour government and last three years.
Ed stated the £225m funding of this election incentive comes from a 2% increase in Duty for overseas investors and reducing tax avoidance from landlords.
1st April 2015
The Scottish Parliament announced a new system to replace Stamp Duty named Land and Buildings Transaction Tax. Check the new rates for Scotland and calculate any tax due.
3rd December 2014
New reforms of charging were introduced in the Chancellor's Autumn statement with higher bands for more expensive properties.
Find more details about the history of the rates by the Chancellors over the years.
From 25th March 2010: First-time buyers threshold increased to £250,000 (ie:0% stamp duty paid for homes valued up to £250,000 for first-time buyers only). This will last until 31st December 2011.
From April 2010: 5% rate for homes valued over £1,000,000.
Be aware that the stamp duty rate shown previously is payable on all the amount and is not split according to the percentages. So if you have a sale price of £260,000 then your payment rate is 3% of all of the £260,000. Full breakdown: full Budget 2010 Stamp Duty Rates and when they take effect.
Lower Rates for commercial property used by the business community still apply.
SDLT for Disadvantaged Areas
The rates for disadvantaged areas of the UK are exactly the same as the above except the 1% rate starts at £150,000 rather than the standard £125,000
About Stamp Duty
Purchasing a house or shares has incurred the tax for many decades now.
The initial rate of 1% was drastically increased many times under the labour government from 1997 through to 2010 to a top rate of 7%.
The Conservative party made substantial reforms in late 2014 to increase the top rate even further to 12%. However, 98% of home sales will see a reduction in their overall tax bill from these changes.
Your solicitor usually calculates the amount due during your home move. The total amount makes up your final invoice, deducted from any proceeds, and automatically transferred over the HMRC on your behalf.
In legal terms, HM Revenue and Customs calculate what is termed "the consideration". Usually the consideration is simply the total purchase price, but could include other aspects of a sale.
The percentage is on the total value of your home purchase so if you are in the 4% bracket the percentage is on your total purchase rather than one rate for part of the scale.
Simply multiply the bracket your house purchase price is within by the rate for that bracket and you have the total amount of duty tax you'll need to pay.