Stamp Duty Explained
Stamp duty explained when preparing to buy a property, most people think about deposits, mortgage rates and the search for the right home. One cost that regularly takes buyers by surprise is Stamp Duty Land Tax (SDLT). As a mortgage broker, I see time and time again how stamp duty can affect affordability, investment returns, and the overall buying budget.
Understanding stamp duty early helps ensure there are no unexpected costs at completion. This guide explains exactly how stamp duty works, along with clear examples that show how much you might pay in different situations.
For more detail about stamp duty, see the official GOV.UK page here.
What Is Stamp Duty Land Tax?
Stamp Duty Land Tax is a tax paid when purchasing a residential or commercial property. The amount due depends on the price of the property and your circumstances, for example, whether you’re a first-time buyer, moving home, or purchasing a buy-to-let.
Your solicitor will calculate the amount of stamp duty you need to pay and will handle the process of paying it on your behalf. Stamp duty is due shortly after you complete the property transaction, but it’s important to understand your liability long before you reach that point.
Who Needs to Pay Stamp Duty?
If you’re buying a residential property or land in England or Northern Ireland, you’ll almost certainly need to pay stamp duty land tax (SDLT). This applies to most buyers, including first-time buyers, home movers, and those purchasing additional properties such as second homes or buy-to-let investments.
The duty land tax (SDLT) is due within 14 days of completion, and your solicitor usually handles the payment.
Even first-time buyers may need to pay stamp duty if the property price exceeds certain thresholds, so always check eligibility early.
Calculating Stamp Duty
Stamp duty is calculated on a sliding scale, with different percentages applied to different portions of the property price. Your status as a buyer (first-time buyer, homeowner, or landlord) affects the rate you pay.
Using a stamp duty calculator is the easiest way to get an accurate estimate of your tax.
Stamp Duty on Your Main Residence
When buying your main residence, stamp duty is charged in bands. You only pay the higher rate on the portion that falls within that band.
Example: Stamp Duty on a £300,000 Main Residence
- £0 tax on the first £125,000
- £2,500 tax on the next £125,000 (2%)
- £2,500 tax on the remaining £50,000 (5%)
- Total Stamp Duty: £5,000
Stamp Duty for First-Time Buyers
First-time buyers benefit from reduced stamp duty and often pay nothing on homes up to the current relief threshold.
Example: First-Time Buyer Purchasing at £300,000
- Full purchase price falls within first-time buyer relief band
- No stamp duty is payable
- Relief applies only if all buyers are first-time buyers
- Total Stamp Duty: £0
This relief is often a major budgeting advantage.
Stamp Duty for Second Homes and Buy-to-Let Properties
If you already own a property and buy another, you pay the standard rate plus a 3% surcharge.
Example: Buying a £300,000 Additional Property
- Standard stamp duty: £5,000
- 3% surcharge on full purchase price: £9,000
- Total Stamp Duty: £14,000
The surcharge significantly affects landlord and investor budgets.
Stamp Duty on Higher-Value Homes
Higher-value properties fall into higher tax bands.
Example: Buying a £750,000 Main Residence
- £0 on the first £125,000
- £2,500 on the next £125,000 (2%)
- £25,000 on the next £500,000 (5%)
- Total Stamp Duty: £27,500
If stamp duty is not paid on time, HMRC may charge interest.
Replacing Your Main Residence
If you sell your main residence and buy a new one on the same timeline, you are charged at standard residential rates not at the higher additional property rate.
If you temporarily own two properties at completion, you must pay the surcharge but can reclaim it once your previous home sells (within the allowed timeframe).
Some buyers consider adding stamp duty to their mortgage possible, but it increases your borrowing and long-term interest.
Inherited Property and Stamp Duty
Inheriting property can move you into the higher-rate category when buying another home, even if you do not rent out or live in the inherited property.
This frequently affects couples and beneficiaries of family homes.
Buying in Northern Ireland
Northern Ireland follows the same SDLT rules as England. Rates and thresholds are identical.
However, conveyancing processes differ slightly, so working with a solicitor familiar with Northern Ireland law is recommended.
Why Stamp Duty Matters for Mortgage Planning
Stamp duty affects:
Total cash needed upfront
Affordability assessments
Loan-to-value calculations
Investment yield for landlords
For shared ownership homes, you can choose whether to pay stamp duty on:
The share you’re buying OR the full market value
This choice impacts your mortgage planning.
Wales and Scotland use different systems (Land Transaction Tax and Land & Buildings Transaction Tax), so buyers in these regions must follow separate rules.
As a broker, I ensure stamp duty is factored into the budget early to prevent issues later.
Future Changes to Stamp Duty
From April 2025:
First-time buyer relief thresholds have been reduced
Maximum eligible purchase value for relief is lower
Some buyers will pay more stamp duty than before
Always check the most recent guidance before making an offer.
Final Thoughts
Stamp duty is a major cost in the home buying process. Knowing how it works prevents unexpected bills and helps you plan confidently.
Whether you are buying your first home, upgrading, or investing in buy-to-let, understanding stamp duty rules is essential for accurate budgeting and affordability planning.
Get help from an experienced mortgage broker.
You can speak to one of our specialist mortgage brokers who would be able to guide you through the process. They will advise if there is a lender available and the maximum loan amount based on your circumstances. We are a whole of market mortgage brokerage with access to all lenders.
Call us on 01332 470400 or complete the form with your details for us to give you a call back.
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FAQs
What is stamp duty?
Stamp duty is a government tax charged on certain transactions, most commonly when buying property or land.
When do you have to pay it? And who pays?
The buyer pays SDLT, not the seller.
It is normally due at completion, and you must file the return and pay HMRC within 14 days of completing the purchase.
How are the tax rates determined?
SDLT uses a tiered system, where different portions of the property’s price are taxed at different rates.
Standard rates from April 2025:
0% on the first £125,000
2% on £125,001–£250,000
5% on £250,001–£925,000
10% on £925,001–£1.5m
12% on amounts above £1.5m
Are there special rules for first-time buyers?
Yes. First-time buyers pay 0% on properties up to £300,000, and 5% on the portion from £300,001 to £500,000.
Above £500,000, standard rates apply.
Are there extra charges for second homes or buy-to-let properties?
Yes. Purchases of additional properties usually incur an extra surcharge on top of the standard SDLT rates.
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