Property Tax and How To Budget For Stamp Duty
Reviewed by Personal Tax Administrator, Jane Rahal
Reviewed by Jane Rahal
Jane Rahal joined RIFT Tax Refunds in 2015, bringing her expertise in managing inquiries and supporting new and returning customers. Working her way up the ranks, she began her most recent role as...
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This article's designed to help you:
- Understand what Stamp Duty is and how it affects you.
- Budget effectively when buying a property
- Make good financial decisions.
What is stamp duty?
Stamp Duty Land Tax (SDLT) is a tax you pay when buying most types of land or residential property in England and Northern Ireland. Scotland and Wales have their own systems, but the same idea, what you pay depends on the value of the property you’re buying.
In simple terms, there are several different SDLT bands, each with its own tax rate. The good news? If you’re buying a property for £250,000 or less, you may not have to pay SDLT at all.
Instead of applying the top rate to the whole property price, the tax is calculated in chunks, meaning you pay different rates depending on the property price range.
How to calculate stamp duty
For the 2024/25 tax year, the SDLT rates on residential properties are:
| Up to £250,000 | 0% |
| The next £675,0000 (portion from £250,001 to £925,000): | 5% |
| The next £575,000 (the portion from £925,001 to £1.5million): | 10% |
| Above £1.5million: | 12% |
As an example, if you're buying a house for £295,000 the SDLT would be calculated like this:
| 0% on the first £250,000 | £0 |
| 5% on the next £45,500 | £2,250 |
| Final total SDLT | £2,250 |
These rates apply to the majority of people, but there are some exceptions, like first-time buyers.
Stop overpaying tax! Millions of pounds in tax refunds go unclaimed every year because people don't realise they're owed money.
Stamp duty for First-Time Buyers
If you’re a first-time buyer, you may benefit from some relief:
- No SDLT on homes up to £425,000.
- If the property is worth more than £425,000 but less than £625,000, you’ll only pay 5% on the portion of the price above £425,000.
So, if you're buying a first home for £500,000, you would pay:
- No SDLT on the first £425,000.
- 5% on the remaining £75,000, which equals £3,750.
Stamp duty for additional homes
If you already own a residential property and are buying another, you’ll pay an extra 3% on top of the standard SDLT rates for any second homes, holiday homes, or buy-to-let properties. This extra charge applies whether you live in England or Northern Ireland, though it increases to 4% in Scotland or Wales.
The timing of your purchase is key here. If you sell your current home before buying a new one, you won’t pay the extra 3% charge. But if you’ve yet to sell your main residence when you buy a new home, you’ll pay the extra 3%. However, you can claim a refund if you sell your original property within 36 months.
Additionally, if you’re a non-resident for tax purposes, you may face a 2% surcharge when purchasing a residential property in England or Northern Ireland.
How to budget for stamp duty
Stamp Duty can be a hidden cost in the home-buying process, so it's crucial to budget for it properly. Your mortgage lender won’t cover the SDLT, so you’ll need to plan for it separately.
As well as SDLT, there are other costs to consider, such as:
- Solicitor’s fees
- Removal costs
- Survey fees
When you’re budgeting for Stamp Duty, consider these “hidden” costs, so you don’t run into surprises.
If you're a first-time buyer, buying a property for less than £425,000 will allow you to avoid SDLT altogether, which can be a huge help. For properties above this price, start thinking about SDLT as an extra cost alongside your deposit, and include it in your budget from the start.
As for basic money management, we’ve talked about the 50/30/20 rule and zero-based budgeting in a few of our other articles, and they’re definitely worth putting into action when you’re planning to buy property. You could also check out our guide, “Easy Ways to Save for a House on a Low Income”, which covers several other options you might want to consider.
Keep checking back here for more money tips and updates. We’re experts at saving you cash and we’re always here to help. That’s the reason why you’re better off with RIFT.
Rental income and stamp duty
If you’re buying a property to rent out or use as a second home, it’s also important to understand how rental income tax works alongside Stamp Duty. Owning a rental property can come with its own set of taxes, which may affect your overall budget.
To help you manage rental income tax efficiently, use our Rental Income Tax Calculator. It’ll help you calculate the amount of tax you’ll need to pay on your rental income, and ensure you’re on track with all your tax responsibilities. Whether you're a new landlord or an experienced property owner, it’s a great tool to keep your finances in check.
If you’re earning rental income, you’ll need to report this to HMRC, it’s important to keep on top of the taxes you owe to avoid penalties, for more information check out our Self Assessment Guide. Our Rental Income Tax Calculator helps make sure you stay compliant and avoid unnecessary surprises down the line.
RIFT Roundup: what's it all mean?
- Stamp Duty Land Tax (SDLT): A UK tax you pay when you buy most kinds of land and property.
- The 50/30/20 rule: A simple way to divide up your money so you don’t lose control of it.
- Zero-based budgeting: A way of working out where every penny of your income’s coming from and going.
Free tax refund checker: Our tax rebate calculator will give you an instant estimate of how much tax you could be owed back from HMRC
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