Stamp duty bands ‒ how much tax will you pay when buying a house?

Your stamp duty bill can vary significantly based on which bands apply to you. Here we give you the full rundown on how stamp duty bands work
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  • Stamp duty is a big earner for the Treasury. According to the analysis of data from HM Revenue & Customs by Coventry Building Society, the Treasury received a whopping £14bn in stamp duty in the 2021/22 tax year, the highest on record.

    Stamp duty is a crucial consideration for anyone buying a house, as it can add thousands to the cost of the deal. But the eventual stamp duty bill you face can vary based on a host of factors, such as where you are buying, the price of the property and even your history of home ownership.

    At the heart of that bill will be the stamp duty bands that apply to the transaction, which is why it’s so important to understand how those bands work.

    In this guide we’ll break down everything you need to know about stamp duty bands, while you can also use our stamp duty calculator to see how much stamp duty you will need to pay.

    If you are taking your first step on to the property ladder, make sure you ready our guide on stamp duty for first time buyers as you may be eligible for a reduced rate.

    What are the different stamp duty bands in England, Wales, Scotland and Northern Ireland for a main residence?

    The first thing to bear in mind is that the stamp duty bands for the purchase of your main residence ‒ which is classed as the property in which you will live most often ‒ work differently across the various countries that make up the United Kingdom.

    Let’s look at England and Northern Ireland first:

    Stamp duty bands Standard rate of stamp duty
    £0 to £125,000 0%
    £125,000 to £250,000 2%
    £250,000 to £300,000 5%
    £300,000 to £500,000 5%
    £500,000 to £925,000 5%
    £925,000 to £1,500,000 10%
    £1,500,000 12%

    As you can see, the threshold at which stamp duty kicks in stands at £125,001. This means that you will pay no stamp duty if you buy a property worth £125,000 or less.

    For purchases worth more than £125,000, the stamp duty bill is worked out by applying the tax rate to the portion of the purchase price that falls within each stamp duty band.

    Let’s take the example of a £200,000 property purchase. There would be no tax to pay on the first £125,000, with the buyer then paying 2 per cent on the £75,000 that falls within that stamp duty tax band. This works out as a stamp duty bill of £1,500.

    In Scotland, there is instead a Land and Buildings Transaction Tax (LBTT). These are the bands and corresponding rates in Scotland.

    LBTT bands Standard rate of tax
    Up to £145,000 0%
    £145,001 to £250,000 2%
    £250,000 to £325,000 5%
    £325,000 to £750,000 10%
    Over £750,000 12%

    In Wales the system is called Land Transaction Tax (LTT).

    LTT bands Standard rate of tax
    Up to £180,000 0%
    £180,000 to £250,000 3.5%
    £250,000 to £400,000 5%
    £400,000 £750,000 7.5%
    £750,000 to £1,500,000 10%
    Over £1,500,000 12%

    Though the tax bands are set at different levels of Scotland and Wales, in practice the tax works in essentially the same way. If you buy a property or land, then you will pay tax based on how much of the purchase price falls within the relevant tax band.

    It’s also worth noting that the situation works slightly differently for those purchasing their first home. Depending on where you are buying, then you may find that you are exempt from paying stamp duty, or at least a portion of the bill, if you are a first-time buyer.

    Red brick terraced period house with white front door and black gate

    Image credit: Future PLC/Colin Poole

    How do stamp duty bands change for a second home?

    The stamp duty tax bands that we have explained above only apply to residential purchases. In other words, for your main residence. There is a different setup if you are purchasing a second home or a buy-to-let property.

    Back in April 2016, the government brought in an additional stamp duty charge that would apply to buyers in this position.

    The idea was that this extra tax charge would dampen the appetite of buy-to-let investors, who are often in direct competition with first-time buyers for the cheapest homes. The thinking was that by making landlords and investors pay a higher rate of tax, they may be put off from purchasing these properties, giving first-time buyers a helping hand onto the housing ladder.

    In England and Northern Ireland a second home surcharge of 3 per cent applies to each tax band. This is charged to those buying second homes, buy-to-let properties and also businesses purchasing residential properties. It doesn’t apply if you are replacing your main home, even if you have other property interests.

    The second home surcharge is higher in Scotland and Wales, where you will have to pay an additional 4 per cent on each tax band.

    Tim Walford-Fitzgerald, partner at accountancy firm HW Fisher, says: ‘Whilst there are three different regimes between England and Northern Ireland, Scotland and Wales each applies increased rates on the tax payable on the purchase of additional residential properties for more than £40,000. The main difference is the rate applied.

    ‘It may be remembered that extra taxes on purchase are not the only disincentive from acquiring second homes. There may also be a premium payable on Council Tax, with Wales recently announcing that the permitted premium will increase to 30 per cent from 2023.’

    How do I work out my stand duty band?

    It is relatively simple to work out which stamp duty bands apply to a potential purchase, and therefore what your eventual stamp duty bill is likely to be.

    Let’s say you are an existing homeowner who is moving house, and you are buying a new home for £300,000. If we break the purchase down into the relevant stamp duty bands, your bill would be:

    0% on the first £125,000 ‒ £0

    2% on the portion between £125,000 and £250,000 ‒ £2,500

    5% on the portion between £250,000 and £300,000 ‒ £2,500

    Overall, that means a £5,000 stamp duty bill in total.

    If you’re buying the property, in England, as a second home or a buy-to-let investment, then you will need to add an extra 3% to each band. This would therefore be:

    3% on the first £125,000 ‒ £3,750

    5% on the portion between £125,000 and £250,000 ‒ £6,250

    8% on the portion between £250,000 and £300,000 ‒ £4,000

    That means you would have a total stamp duty bill of £14,000.

    Remember, in Scotland and Wales the surcharge is 4%, so in this example you would face an even higher stamp duty bill.

    There may be occasions where you inadvertently own two properties simultaneously, without planning a move into buy-to-let or holding a holiday home. Will this mean a higher tax bill?

    Thankfully, there is some wriggle room here. If you end up in this situation, you have up to three years in order to sell your old home and apply for a stamp duty refund.

    What is the progressive stamp duty rate system?

    The stamp duty system in the UK is regarded as a progressive stamp duty system. It follows the same principles as income tax, and was adopted in December 2014.

    For example, with income tax the amount you pay is based on how much of your income falls within certain tax bands. There’s no tax to pay on the first £12,500 ‒ known as the personal allowance, with the basic rate (which stands at 20%) then applying on earnings between the personal allowance and £50,270, at which point the higher rate of 40% kicks in.

    If you earn £51,000, you are only just in the higher rate tax band, but you do not pay that 40% rate on the entirety of your earnings. You only pay it on the portion of your salary that falls into that tax band, which in this case is £730.

    That’s largely how progressive stamp duty works. You only pay higher tax rates on the portion of your property that falls within the corresponding stamp duty bands.

    Before stamp duty was reformed in 2014, it worked on a slab system. This meant that a single percentage rate was applied to the entire purchase price. As a result, if the price you were paying edged into a higher stamp duty band, you would then pay a higher stamp duty rate on the entire purchase price.

    The idea is that the progressive stamp duty system we have today is fairer.

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