How Stamp Duty is Calculated
Understanding how Stamp Duty Land Tax works is crucial for property buyers in England and Northern Ireland. Our comprehensive guide breaks down the calculation process and highlights important considerations.
Understanding Stamp Duty Calculation
Progressive System
SDLT uses a progressive tax system where different rates apply to different portions of the property price, not the whole amount.
Tax Bands
The purchase price is divided into bands, with each band charged at its specific rate. You only pay the higher rates on the portion above each threshold.
Additional Charges
Surcharges may apply for second homes (3%, increasing to 5%) and non-UK residents (2%), calculated on the entire purchase price.
Example Calculations
Standard Purchase (£500,000)
- First £250,000 × 0% = £0
- Remaining £250,000 × 5% = £12,500
- Total SDLT = £12,500
First-Time Buyer (£500,000)
- First £425,000 × 0% = £0
- Remaining £75,000 × 5% = £3,750
- Total SDLT = £3,750
Stamp Duty Rates
Current Rates (Until March 31, 2025)
| Property Value | Rate |
|---|---|
| Up to £250,000 | 0% |
| £250,001 - £925,000 | 5% |
| £925,001 - £1.5m | 10% |
| Over £1.5m | 12% |
New Rates (From April 1, 2025)
| Property Value | Rate |
|---|---|
| Up to £125,000 | 0% |
| £125,001 - £250,000 | 2% |
| £250,001 - £925,000 | 5% |
| £925,001 - £1.5m | 10% |
| Over £1.5m | 12% |
Special Circumstances
First-Time Buyers
First-time buyers enjoy special relief on properties up to £625,000:
- No SDLT on first £425,000
- 5% on portion between £425,001 and £625,000
- Standard rates apply above £625,000
Additional Properties
When buying a second home or buy-to-let property:
- 3% surcharge on entire purchase price (until Oct 30, 2024)
- Increasing to 5% from October 31, 2024
- Applies to properties over £40,000
Non-UK Residents
Additional considerations for international buyers:
- 2% surcharge on entire purchase price
- Applies in addition to standard rates
- Stacks with other applicable surcharges
Key Changes Timeline
Additional Property Surcharge Increase
Surcharge for second homes and buy-to-let properties increases from 3% to 5%
New SDLT Rates
Updated thresholds and rates come into effect, including reduced first-time buyer relief
Frequently Asked Questions
When do I need to pay Stamp Duty?
Stamp Duty must be paid within 14 days of completing your property purchase. Your solicitor usually handles this payment as part of the conveyancing process.
How is Stamp Duty calculated on a second home?
Second homes incur an additional surcharge (currently 3%, increasing to 5% from October 31, 2024) on top of the standard SDLT rates. This applies to the entire property price if it's £40,000 or more.
What qualifies as a first-time buyer?
A first-time buyer is someone who has never owned a property anywhere in the world. Both buyers must be first-time buyers to qualify for the relief on joint purchases.
Can I add Stamp Duty to my mortgage?
While it's possible to add Stamp Duty to your mortgage, this means you'll pay interest on it over the term of your mortgage. It's generally better to pay it as a one-off cost if you can afford to.
For official guidance, visit the HMRC Stamp Duty Land Tax page.