Stamp duty land tax, commonly referred to just as stamp duty, is a tax levied when you purchase land or shares.
Technically the tax you pay when you buy land is ‘stamp duty land tax’ but this is commonly referred to simply as stamp duty.
Higher rates of stamp duty were introduced by the government from April 2016 in relation to second properties, for example buy to let properties and second homes (se below).
Subject to the rules on second homes below, if you buy a residential property and the purchase price is £125,000 or less you don’t pay stamp duty. If the purchase price is greater than £125,000, you will have to pay stamp duty. The amount of tax to be paid is based on a percentage of the purchase price. The relevant rates [as at 4th December 2014] are contained in the table below:
The rates apply only to that part of the property price that falls within each band. 0% is paid for the first £125,000 then 2% on the portion up to £250,000, 5% up to £925,000, then 10% up to £1.5 m; 12% on anything above that. So, for example, on a £300,000 property the tax to pay would be £0 on the first £125k (0%), £5,000 on the portion up to £250,000 (2%) and £2,500 on the remaining £50K (5%).
If your purchase will result in you (and your spouse or civil partner between you) owning a legal interest in two residential properties or more (anywhere in the world), then the higher rates of stamp duty apply, with a surcharge of 3% on top of the standard rates set out above.
As an example, if a second property is purchased at £150,000 then the stamp duty payable is £5,000, being charged at 3% on the first £125,000 and 5% on the amount above that figure.
There are exceptions where a property is being bought to replace an existing main residence, including provisions for reclaiming higher rate tax where an existing main residence is sold after the new purchase.
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