Stamp Duty (officially known as Stamp Duty Land Tax) is a tax on home purchases in the UK. Only homes over a certain value are subject to Stamp Duty and the rate you pay depends on a number of factors. The system has undergone some significant changes recently, changing the way Stamp Duty is calculated in England, Wales and Northern Ireland and replacing it in Scotland with a system called Land and Buildings Transaction Tax. Here’s what you need to know.
England, Wales and Northern Ireland
Previously Stamp Duty throughout the UK was charged according to pricing bands on what is known as a “slab” basis. This involved paying a percentage of the total value of the property with that percentage being determined by the sale price. So, if a house cost £250,000 you would pay 1% or £2,500, but if the house cost just one pound more, pushing in into the next price bracket, you would pay 3% of the total value of the house – £7,500.
Under the new system, which took effect on 4th December 2014, the tax you pay will be similar to income tax in that you only pay the higher rate on the value of the property above the threshold. So, you will pay nothing on the first £125,000, 2% on everything between £125,001 and £250,000, 5% on everything between £250,001 and £925,000, 10% on everything between £925,001 and £1,500,000 and 12% on anything over £1,500,000. This should leave most purchasers paying less in stamp duty, except for those buying homes costing in excess of £925,000.
Although Scotland previously used the same system the rest of the UK used to use, from 1st April 2015 people purchasing a home in Scotland will instead pay a Land and Buildings Transaction Tax. This is essentially the same as the new stamp duty system used by the rest of the UK, but with different rates.
In Scotland, there will be no tax on homes up to £145,000 in value, then a 2% rate on any value between £145,001 to £250,000, 5% £250,001 to £325,000, 10% £325,001 to £750,000 and 12% on everything over £750,000.