Stamp duty explained Stamp duty rates
The stamp duty rates you pay when buying a property vary from 0% to 12%, depending on the value of the property.
You won't have to pay stamp tax on the first £125,000 of a property, but as stamp duty is tiered, you'll pay a percentage on portions of the value over that.
The stamp duty rates, which changed in December 2014, are set out in the graphic below. You can also scroll down for an example of how the new tier system works.
If you're concerned about what paying stamp duty charges may mean for you, it's worth speaking to a mortgage adviser.
The Which? Group offers an independent mortgage advice service, Which? Mortgage Advisers, that looks at thousands of mortgages to find the best deal for your personal circumstances. The advisers are also able to explain how stamp duty works and how it will affect you. Call 0808 252 7987 for a free initial consultation.
New stamp duty rates
Because stamp duty is tiered, you will pay a different stamp duty rate on different portions of the property value. In simple terms, you won't pay any stamp duty on the first £125,000. You’ll then pay 2% on the portion up to £250,000, and 5% on the portion up to £925,000. Between that point and £1.5 million, it’s 10% - then 12% on anything over £1.5 million.
Take a look at this example to see how it works:
- Property price: £275,000
- Portion 1: £0 - £125,000 - 0% tax, so total paid for this chunk of the purchase price = £125,000
- Portion 2: £125,000.01 - £250,000 - 2% tax (£2,500) + £125,000 = £127,500
- Portion 3: £250,000.01 - £275,000 - 5% tax (£1,250) + £25,000 = £26,250
- Total paid: £278,750 (£3,750 of which is stamp duty)
Find out more: to find out exactly how much stamp duty you'll pay on the property you're buying, use our stamp duty calculator
Valuing property just below a stamp duty threshold
Before the introduction of the tiered system, those selling a property were often advised to avoid valuing a property just above a stamp duty threshold, as this would dramatically increase a buyer's stamp duty bill. If a property was valued above a stamp duty threshold, even by just a penny, the buyer would have had to pay a higher rate of tax on the entire purchase price.
However, under the new system, the buyer only has to pay the higher rate of tax on that additional amount, so there are no huge increases to their overall tax bill.
Breaking a property into smaller units for stamp duty purposes won't work - HMRC will treat them as one transaction.
Find out more: how to value your house - set a realistic price that will attract buyers
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