With house prices rising rapidly more and more homebuyers are having to pay stamp duty land tax - and many are forced to pay a higher rate.
This guide is fully updated with changes announced in the Autumn Statement 2014 and the calculator has the new rates. It also explains when and how you'll have to pay stamp duty and, crucially, how much it'll actually set you back.
In this guide
Stamp Duty Calculator How much will I have to pay?
If you've exchanged on a property before 11.59pm on 3 December, but not yet completed, and you're wondering whether to pay under the new stamp duty system or the old one (it's your choice), then we've kept the old stamp duty rate calculator so you can compare.
What is stamp duty?
Stamp duty land tax - to give it its full name - is a lump-sum tax that anyone buying a property or land costing more than a set amount has to pay. The rate you'll pay the tax at varies based on the price of the property and the type (we'll focus on residential, rather than commercial, buildings).
Sweeping changes to stamp duty were announced in the Chancellor's Autumn Statement on 3 December 2014. Stamp duty has been reformed - the slab system (where you'd pay a single rate on the ENTIRE property price) has been swept away, and in its place is a more progressive system.
Under the new system, you'll only pay the rate for the proportion of the property that's at that rate. It's quite complex, so here's an example to better illustrate the changes:
Let's assume you're buying a property for £300,000.
Old system: You would have paid 1% on a property between £125,000 and £250,000, but between £250,000 and £500,000 you'd pay 3%. So because the purchase price is over £250,000, you'd have paid 3% on the entire purchase price, despite only being £50,000 above the threshold. Thus, you'd have paid £9,000 in stamp duty.
Read more on why the old system was unfair in Martin's blog: The UK's worst tax: stamp duty.
As the price you pay for a new property increases, so do the rates of stamp duty. You pay a percentage of the cost, and the rate payable leaps up at a set of thresholds - but, crucially, you now ONLY pay the proportion of the purchase price that's actually above the thresholds at the higher rate, and NOT the highest rate on the total amount.
What stamp duty rate will I pay?
Stamp duty rate - on that portion of the purchase price
|Up to £125,000||
|£125,000.01 - £250,000||
|£250,000.01 - £925,000||
|£925,000.01 - £1,500,000||
|Correct from 4 December 2014|
What are the old rates of stamp duty?
If you've exchanged on a property before 11.59pm on 3 December, but not yet completed, you can choose which stamp duty system you'd like to pay under. So, we've left the old figures here, and we still have the old calculator for you to use to help decide. If you've completed but have not yet paid your stamp duty bill, you will have to use the old system.
What stamp duty rate will I pay (pre 3 December 2014)?
Stamp duty rate
|Up to £125,000||
|£125,000.01 - £250,000||
|£250,000.01 - £500,000||
|£500,000.01 - £1,000,000||
|£1,000,000.01 - £2,000,000||
|Correct before 3 December 2014|
The precise boundary for hitting a new tier is the first penny of that tier. So, though it's a tad unlikely, if you were to pay £500,000.01, then you'd face 4% stamp duty (£20,000), but pay one penny less at £500,000 and stamp duty will be 3% (so £15,000) - showing the absurdity of this tax's structure.
This table shows you how stamp duty compares with the old and new system for different property purchase prices:
What you'll actually pay: old and new stamp duty
|Purchase price||Old Stamp Duty||New Stamp Duty|
To see rates for past years, take a look at the HMRC website.
How do I pay stamp duty?
The crucial thing to know is that you have 30 days from the date of completion (when all the contracts are signed and dated - read our Buying a Home guide for full timeline) to pay your stamp duty bill. Take longer and you could face a fine and possibly interest on top, so don't!
In reality, your solicitor will probably sort this out and push you to pay the bill straight away - in fact, most tend to want their cash before completing the transaction for you, just in case you then can't or don't pay them.
They are also likely to guide you through the process, but in case they don't...
Find your Unique Transaction Reference Number (UTRN).
It's 11 characters long and found on either your submission receipt if you have filed online, or on your paper stamp duty return.
Pay by online or phone banking?
Just as you might move money to a pal's account, you can call up your bank, use HMRC's bank details, and pay it. This normally takes three working days, so take this into account and don't miss the deadline.
Other ways to pay.
If you don't have online or phone banking set up, you can pay by card over the web (though there's a charge for credit cards), giro in most banks or by cheque in Post Office branches or post - though the last three options require you to present a payslip.
Find the best buy mortgages
If you're ready to get a mortgage, tell our Mortgage Best Buys tool what you want, and it'll speedily find the top deals for you.
Ready to remortgage?
If you want to change mortgage, this free guide has tips on when you should & shouldn’t remortgage and how to grab top deals.
Ready to get a mortgage?
Want to get on that first rung? Our free guide helps you find the cheapest mortgage and boost your chances of getting accepted.
Thinking of buying to let?
Property investing newbie or an old hand wanting the top deal? Our free guide outlines all you need to know about buy-to-let.
The simple answer here is that it's best that you don't, but many people find that they have to.
To add the cost of stamp duty to your loan is a case of borrowing more when the mortgage is taken out. So, say you needed a £180,000 mortgage to purchase a house costing £300,000, but wanted to add the stamp duty, you'd need to request borrowing of £185,000.
There are two main things to consider here. Firstly, as mortgages tend to be taken out over a long term (25 years or more), that's normally how long the stamp duty borrowing will last too. Over a 25-year term, at a rate of 5%, that extra £5,000 borrowing will cost around £8,500 in interest, so it's vital to be aware of the cost.
Secondly, this could affect your loan-to-value ratio (LTV) - the measure of how much of a property's value you are borrowing. The most competitive deals require a maximum LTV of 60% - yet in the example above, adding the stamp duty would push you from 60% to almost 62%, so be careful - speak to a whole-of-market mortgage broker.
For once, yes! The same arrangements and rates apply for homebuyers in England, Wales, Scotland and Northern Ireland.
However, housing is a devolved issue and in Scotland, these new UK-wide stamp duty rules will be replaced on 1 April 2015 by the Land and Buildings Transaction Tax. It's a broadly similar scheme, although the thresholds are different. We'll update this guide with the new figures when they come into force.