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What is stamp duty and how is it calculated?

Stamp Duty Land Tax or, as it is more commonly known, ‘stamp duty’, is a government tax on purchases of property or land.

It is important for prospective property buyers to consider stamp duty when purchasing property as it can seriously impact the upfront cost associated with the purchase.

The rate at which stamp duty is charged for residential freehold properties can be seen below:

Mossop & Bowser (29200535)
Mossop & Bowser (29200535)

Value Stamp Duty rate

£0 - £125,000 0%

£125,001 - £250,000 2%

£250,001 - £925,000 5%

£925,001 - £1.5million 10%

Over £1.5million 12%

It is important to note that the rate at which stamp duty is charged only applies to the part of the property price falling within that band. For example, if you bought property A for £300,000 you would pay no stamp duty on the first £125,000, 2% on the next £125,000 and 5% on the remaining £50,000. Therefore, the total amount of stamp duty owed would be £5,000.

However, if you already own a property and are purchasing an additional property (such as a buy-to-let property) for £40,000 or more, an additional 3% is added to each band.

Therefore, if you already own property B at the time you purchase property A, you would be charged 3% on the first £125,000, 5% on the next £125,000 and 8% on the remaining £50,000, creating a total stamp duty charge of £14,000.

It is possible to reclaim the additional stamp duty paid (in this case £9,000) if you sell your additional property (ie property B) within three years of purchasing the property stamp duty was paid on (ie property A).

If you qualify as a first-time buyer and you are looking to purchase a property for less than £500,000 you may be able to claim a relief against stamp duty. If you are eligible for the relief, you will pay no stamp duty on the first £300,000 of your purchase, a potential saving of £5,000.

If you are concerned about stamp duty, or any other issue relating to your matter relating to your purchase, please contact a member of our conveyancing team on 01406 422651.

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