stamp duty London homebuyers
Stamp Duty Land Tax (SDLT) is a key cost that London homebuyers must include in their budget. Whether you’re a first-time buyer or looking to expand your portfolio of properties, understanding how the tax is charged will avoid unexpected fees and enable you to better control your finances.
What Is Stamp Duty Land Tax?
Stamp Duty Land Tax (SDLT) is a government tax when you purchase property or land in England and Northern Ireland. It is payable whether you are purchasing a freehold or leasehold property and whether you are paying cash or using a mortgage.
The amount of SDLT you pay is based on what you paid for the property. With as high-value a property market as London, this can be considerable, so it is in buyers’ interests to be aware of the thresholds and be ready.
How Stamp Duty Works in London
The higher-than-average property prices in London ensure that most buyers will be paying at least some SDLT. The standard SDLT thresholds are:
- Up to £250,000: 0%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Over £1.5 million: 12%
These are in bands, so you only pay the higher rate on the amount of the property price that’s in that band.
Example:
For a £600,000 property in London (as a regular buyer), you would pay:
0% on the first £250,000 = £0
5% on the remaining £350,000 = £17,500
Total SDLT: £17,500
First-Time Buyer Relief
You can get relief if you are a first-time buyer in London. It is designed to get you on the property ladder by reducing the SDLT burden.
- 0% on the first £425,000
- 5% on the portion between £425,001 and £625,000
Standard rates are applicable, and first-time buyer relief is not available if the property is over £625,000.
Example:
For a first-time buyer who purchases a £500,000 flat in Putney:
0% on the first £425,000 = £0
5% on the remaining £75,000 = £3,750
Total SDLT: £3,750 (as opposed to £12,500)
The 3% Additional Property Surcharge
If you’re buying a second home, buy-to-let property, or holiday home anywhere in London, you’ll need to pay an additional 3% surcharge over and above standard rates. This even applies to properties under £250,000.
Example:
For a £400,000 buy-to-let purchase:
Standard SDLT = £7,500
Additional 3% = £12,000
Total SDLT: £19,500
Even joint purchases where one of the parties has another property can be caught by the surcharge. Best to take advice from a broker or solicitor in such situations.
Special Considerations for Leaseholds and Shared Ownership
If you’re buying under a Shared Ownership scheme or buying a leasehold property (which is common in London flats), SDLT is different.
You can pay SDLT on shared ownership homes in stages.
High leasehold ground rent or lengthy leases can also initiate additional SDLT consequences for leaseholds.
Planning Ahead for Stamp Duty Costs
Stamp duty is payable within 14 days of completion, but you’ll need to budget for it alongside:
- Legal fees
- Surveys
- Mortgage fees
- Removals
Mortgage broker Oportfolio can calculate your likely SDLT bill upfront and include this in your overall mortgage affordability calculations.
Don’t Get Caught Out by SDLT
London property prices are what they are, so coming to terms with Stamp Duty Land Tax is a necessity. It’s not just “nice-to-know” information, it’s a deal-breaker if not accounted for properly. Let Oportfolio guide you through the actual cost of buying a property, from stamp duty to solicitor’s fees. Through our expert advice, you can be confident and prepared for every stage of the home purchasing process. Get in touch with our team today if you are looking to purchase a new home.
Please note that Oportfolio are not tax advisors. If you do have any tax questions, you should always speak to a qualified tax advisor.
