How does stamp duty work when I buy a home?

The two things that go wrong are budgeting and timing. Buyers plan for the deposit and the legal fees and are surprised by the tax, which is due in cash at completion and cannot be added to the mortgage. And people assume 'stamp duty' is one UK tax, when it is three different taxes with three different sets of rates, three different reliefs and three different filing deadlines.

Step by step

1. Check which tax actually applies.Stamp Duty Land Tax for property in England and Northern Ireland. Land Transaction Tax for property in Wales, collected by the Welsh Revenue Authority. Land and Buildings Transaction Tax for property in Scotland, collected by Revenue Scotland. The property's location decides it, not where you live.
2. Understand that it is banded, not a single percentage.Each rate applies only to the slice of the price that falls within its band, so a price a pound over a threshold does not re-tax the whole purchase. This is the point people most often misunderstand.
3. Use the official calculator, not an estate agent's.HMRC publishes a calculator alongside the current rates. Use it once you have an agreed price, and again if the price changes, because a renegotiation changes the tax.
4. Check first-time buyer relief.Relief exists in England and Northern Ireland for first-time buyers up to a price ceiling, and both the ceiling and the relief have changed repeatedly. Neither you nor anyone buying with you may ever have owned a property anywhere in the world. Check the current rules on GOV.UK.
5. Check whether the higher rate applies.An additional rate applies where you will own more than one residential property at the end of the day of completion. It catches more people than expected — including buying with a partner who owns a flat, and buying before selling.
6. Note the surcharge for non-UK residents.A further surcharge applies to buyers who are not UK resident under a specific statutory test that is not the same as the ordinary tax residence test. If it might apply, ask your conveyancer early.
7. Budget for it as cash at completion.It is normally paid from the completion funds you send to your conveyancer, so it has to be in your deposit money. It generally cannot be added to a mortgage.
8. Know the fourteen-day rule.The return must be filed and the tax paid within fourteen days of completion. Your conveyancer does both. Ask for confirmation that it has been done, because interest and penalties follow a late return.
9. Check the special cases before assuming.Shared ownership has its own rules and a choice about paying in stages or up front. Mixed residential and commercial property is taxed on a different scale. Transfers on divorce or by gift have their own treatment. Each is a question for the conveyancer.
10. Be sceptical of stamp duty reclaim approaches.Firms cold-calling recent buyers to offer a reclaim on the basis that a property was uninhabitable or was mixed use are a known problem. HMRC pursues incorrect claims and the buyer, not the firm, is liable. Ask your own conveyancer or an accountant first.

Tips

• Run the official calculator the day your offer is accepted, and again if the price changes. It takes two minutes and it sets the budget.
• Ask your conveyancer in writing which rate set they have applied and why. It is the cheapest error check in the whole transaction.
• If you are buying before selling, diarise the refund deadline on the day you complete.

Common mistakes

• Assuming one UK stamp duty — There are three land taxes with different rates, different reliefs and different deadlines. Wales in particular has no first-time buyer relief at all.
• Leaving the tax out of the cash budget — It is payable at completion from your own funds and generally cannot be borrowed. Discovering it late can stop a purchase.

If it doesn't work

Questions people ask