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Stamp Duty Tax When Selling a House: Do You Need to Pay?

When you’re selling a home, it’s the buyer who needs to factor in the stamp duty, right? Well, sort of. The buyer might need to cover the stamp duty, but it’s something you should also be aware of as the seller in case you are buying and selling at the same time. With that in mind, we’ve put this guide together looking at stamp duty land tax when selling a house and what you need to know.

What is stamp duty tax?

Known officially as Stamp Duty Land Tax (SDLT), stamp duty is a tax that’s typically paid by the buyer when purchasing a property in the UK. This tax has roots dating back to the 17th century, making it one of the oldest forms of taxation in the country. Over time, it’s evolved and adapted, but it’s always maintained its place as a key part of property transactions.

The buyer is responsible for paying stamp duty, not the seller. The amount they’ll pay isn’t a fixed figure, as it’s calculated as a percentage of the property’s purchase price. The rate varies depending on the price band the property falls into, with pricier properties attracting higher rates. For instance, a property sold for £500,000 will attract a different rate vs one sold for £2 million.

Despite this general rule, there are exceptions. For instance, first-time buyers don’t have to pay stamp duty on homes up to a certain value. Additionally, there are certain exemptions and reliefs available that could reduce the amount of stamp duty payable.

Does stamp duty exist across the UK?

It’s also worth noting that different stamp duty rules apply in Scotland and Wales, which have their own versions of the tax. In Scotland, Land and Buildings Transaction Tax (LBTT) replaces Stamp Duty Land Tax (SDLT). The tax bands and rates vary based on property value. In Wales, Land Transaction Tax (LTT) is applicable instead of SDLT, with different tax bands and rates again based on the property’s price.

So, while stamp duty might seem like something that’s only relevant to the buyer, it’s worth being aware of as a seller. Understanding how it works can help you better navigate the property market, price your property appropriately and potentially negotiate a more favourable sale.

How does stamp duty tax work?

So, how does stamp duty actually function? At its core, stamp duty is calculated based on the price of the property being purchased. It operates on a sliding scale – the more expensive the house, the higher the rate of tax you’re expected to pay. This is what’s referred to as a progressive tax system.

Let’s break it down a bit further. In 2023, the rates for a single property are as follows:

  • No stamp duty is charged on properties up to £250,000.
  • The next £675,000 (the portion from £250,001 to £925,000) is charged at a rate of 5%.
  • The next £575,000 (the portion from £925,001 to £1.5 million) is charged at a rate of 10%.
  • Any remaining amount (the portion above £1.5 million) is charged at a rate of 12%​​.

Anyone buying their first home can claim a discount. This means you’ll pay no SDLT up to £425,000 and 5% SDLT on the portion from £425,001 to £625,000​1​.

If you’re buying a new property and you already own another, you’ll usually have to pay an additional 3% on top of the standard SDLT rates​​. However, if you’re replacing your main residence and have already sold your previous main home, you won’t have to pay the extra 3% SDLT.

You’ll also need to pay higher rates if you haven’t sold your main residence by the time you complete a new purchase. Although, you can apply for a refund if you sell your previous main home within 36 months​.

Finally, if you’re not a UK resident (meaning you’re not present in the UK for at least 183 days during the 12 months before your purchase), you’ll usually pay a 2% surcharge if you’re buying a residential property in England or Northern Ireland​.

As you can see, stamp duty tax isn’t a straightforward fee and can vary greatly depending on your circumstances. Therefore, it’s necessary to factor this tax into your budget when you’re looking to buy a property.

Do stamp duty rates always stay the same?

The simple answer is no; stamp duty rates don’t always stay the same. In fact, they’re subject to change as they’re set by the government and can be altered in response to various economic factors and policy objectives.

Over the years, we’ve seen various changes to stamp duty rates and the ways in which they’re applied. For example, in July 2020, the UK government temporarily raised the stamp duty threshold to £500,000 as part of measures to stimulate the property market during the COVID-19 pandemic.

Furthermore, the devolved governments in Scotland and Wales have their own versions of the tax, Land and Buildings Transaction Tax and Land Transaction Tax, respectively, and these can and do change independently of the rates in England and Northern Ireland.

That’s why it’s important to stay up-to-date with the latest news and information about stamp duty rates when planning to buy a property. The rates can significantly impact overall costs for buyers, and vendors need to factor this in when selling their homes.

How does stamp duty affect property sellers?

At first glance, it might seem like stamp duty is something that only the buyer needs to worry about, especially if you’re only selling without intentions of buying another place. But here’s the thing: stamp duty can indirectly impact you as a seller, and here’s how:

When a potential buyer is budgeting for a house purchase, they have to factor in all associated costs, and one of the most significant of these is stamp duty. This tax can add a considerable amount to the total sum a buyer needs to pay to secure a property.

So, if the stamp duty on a home is particularly high, it could discourage potential buyers, or it might reduce the amount they’re willing or able to offer for your property.

In essence, the higher the stamp duty, the less money the buyer might have available to put towards your asking price. This could potentially lead to negotiations on price or even result in your property being overlooked in favour of a cheaper one with lower stamp duty.

While, as a seller, you’re not directly paying the stamp duty, its influence on buyer behaviour means it can still impact your sale. It could affect how quickly your property sells, the final sale price and your negotiations with potential buyers.

Understanding stamp duty and the effect it can have on potential buyers is crucial when selling your property. It can also help you set a realistic asking price and prepare for negotiations, ensuring a smoother sales process.

Thinking of selling a UK property? Here is an instant, free property valuation tool that will tell you what your home is worth.

Frequently asked questions

There are always questions when it comes to stamp duty. That’s why we’ve put together some answers to the most common queries we come across. So whether you’re wondering if stamp duty applies to inherited properties or if there are any exemptions, we’ve got you covered.

1) Does stamp duty apply to inherited properties?

No, stamp duty isn’t applicable when a property is inherited, as there’s no purchase transaction taking place. However, if you later decide to sell the inherited property, the buyer will need to pay stamp duty based on the sale price.

2) Are there any exemptions to stamp duty?

Yes, there are some situations where you might be exempt from stamp duty. Again, if you’re a first-time buyer and the property costs up to £425,000, you won’t have to pay stamp duty. Other exemptions can apply in cases of property transfer due to divorce or separation or if a property is gifted.

3) Does stamp duty apply to non-residential properties?

Yes, stamp duty applies to non-residential properties as well, but the rates and thresholds are different from residential properties. This includes commercial properties like shops or offices, agricultural land, and forests.

4) Do I have to pay stamp duty if I’m buying a second home?

Yes, if you’re buying a second home, you’ll usually have to pay an additional 3% on top of the normal stamp duty rates.

5) What happens if I don’t pay stamp duty?

Failing to pay stamp duty can result in penalties and interest charges. If you’re unsure about how much stamp duty you owe or how to pay it, it’s best to seek advice from a property professional or solicitor.

Stamp duty when selling a house

This has been your whistle-stop tour of stamp duty and its implications for property sellers. While it might seem like a buyer’s issue, the impact of stamp duty on the property market means it’s something you can’t afford to ignore when selling your house.

If you are planning on selling your home and want a quick sale without worrying about stamp duty fees for the buyer, get a free, no-obligation quote from Property Rescue in seconds. We can sell your house fast and remove the stresses involved.


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