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How much is stamp duty on a house

In the latest post in our FAQ series, we answer a first-time buyer’s questions on stamp duty in the UK.

Q: I am a first-time buyer looking to purchase a house for £130,000 but with the new stamp duty reforms I am concerned that I can no longer afford a property in that price range as the stamp duty seems to have risen to 2%. Is that right?

A: Thank you for your query. Yes the stamp duty land tax has had a bit of a shake-up but it is generally to buyers’ benefit, especially for first time buyers where the purchase price is close to the threshold of a higher stamp duty rate. The new stamp duty thresholds are as follows:

0% up to £125,000
2% on £125,001 - £250,000
5% on £250,001 - £925,000
10% on £925,001 to £1.5 million
12% over £1.5 million

On first glance, it may seem that you are liable for 2% of £130,000 but with the new system in place you effectively get a tax free allowance of £125,000.

For example before the 4th December 2014 you would have paid 1% on the whole amount of £130,000 being £1,300. Now that the new reforms have come in to place you would only have to pay stamp duty of 2% on the £5,000 over the £125,000 allowance being £100 which is a saving of £1,200.

Stamp Duty Thresholds Explained

The changes to Stamp Duty, which came into effect on the 4th of December last year, were developed by George Osborne to replace “badly designed rules” which saw buyers faced with a cliff-edge system where buying a slightly more expensive house could see the amount payable more than triple.

For example, if you bought a £250,000 house under the old system, you would pay 1% (£2500) in stamp duty. However, if you were to buy a house at £250,001, the 3% rate would kick in and you would have to pay £7500.

The new system means buyers won’t be hit with sudden jumps in Stamp Duty when the cost of their home edges into a new bracket.

Now, regardless of the price of your property, the first £125,000 of its value is tax free. Under this system, those buying property under £937,000 will pay less.

To work out how much stamp duty is due on your property, use HMRC’s Stamp Duty Land Tax Calculator.

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