A breakdown of stamp duty and how it can impact your budget

Mortgage experts look at the current rules and rates around stamp duty, including whether you can add the tax to your mortgage and avoid the upfront cost.

Related topics:  Finance,  Property,  stamp duty
Property | Reporter
27th November 2023
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"First-time buyers in Scotland must pay LBTT if their purchase exceeds £175,000. However, in Wales, there is no exemption for first-time buyers"
- Kellie Steed - Uswitch

Despite speculation that stamp duty may be cut as part of the Autumn Statement, Chancellor Jeremy Hunt chose to keep the tax as it currently is.

Uswitch mortgage expert, Kellie Steed, comments: “Overall affordability remains an issue for many would-be homeowners, with house prices having seen a slight rise month-on-month in October, according to Halifax, and the base interest rate remaining set at 5.25% after previously raising fourteen times in less than two years.

"This is why it’s increasingly important to understand all the factors that can impact your overall budget, including one-off fees such as stamp duty.

"The amount of stamp duty you pay depends on how much the property costs, as well as whether it's your first and only home.

"For example, If you buy a house in England or Northern Ireland for £250,000 or more, you must pay stamp duty unless you are a first-time buyer, in which case the threshold before you have to pay is higher. You will pay a 5% duty on any portion of the property between value between £250,001 and £925,000, and then 10% on any portion from £925,001 to £1.5 million. You’ll have to pay 12% on any property value above £1.5 million.

"Transaction Tax. In Wales, it's Land Transaction Tax. You will also usually pay 3% on top of these rates if you own another residential property or any buy-to-let properties."

The rules are slightly different for first-time buyers

Kellie explains: "If you’re buying your first property in England or Northern Ireland, you won’t have to pay any stamp duty on the first £425,000 of your property value. You’ll then pay 5% on any portion of the property between £425,001 to £625,000. However, if your home costs more than £625,000, you cannot claim the relief and will be subject to the above rates.

"You must be a true first-time buyer to qualify for this relief. This means that you or anyone involved in the purchase of the property must never have owned (or part-owned) a property anywhere in the world before. You also must be buying the home to live in as the relief won’t apply if you’re buying a buy-to-let property as a first-time buyer."

How do the rules differ in Scotland and Wales?

Again they are slightly different, explains Kellie: "First-time buyers in Scotland must pay LBTT if their purchase exceeds £175,000. However, in Wales, there is no exemption for first-time buyers. Stamp duty is due within 14 days of completion, your solicitor normally handles this but not always.

"You can include stamp duty in your mortgage to avoid paying a large sum upfront. But you must meet the affordability requirements for the extra borrowing. However, this means you’ll pay more overall, as you’ll be charged interest on the stamp duty.”

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