What is stamp duty?

Stamp Duty Land Tax (SDLT), commonly referred to as stamp duty, is paid if you buy a property or land over a certain price in England and Northern Ireland.

The tax is slightly different if the property is in either Scotland or Wales.

To help encourage those looking to buy a home, the Government introduced a stamp duty holiday in June 2020. From June 2020 until the end of June 2021 buyers have not had to pay any stamp duty for purchases on the first £500,000.

As a potential first time buyer this was seen as great news as, together with a deposit, stamp duty is a cash outlay you have to make when buying a property. The downside was the stamp duty ‘holiday’ also applied to people who were buying an additional property!

How much stamp duty will I pay?

As of July 1st 2021, changes were made, so that stamp duty applied to all properties above £250,000. The rate varies depending on the purchase price:

• £0-£250,000 = 0%

• £250,001-£925,000 = 5%

• £925,001-£1,500,000 = 10%

• £1,500,000+ = 12%

Only having to pay stamp duty for properties above £250,000 will be short lived, and from October 1st 2021 the rates will change back to applying to all properties above £125,000. The rates will therefore be as follows:

• £0-£125,000 = 0%

• £125,001-£250,000 = 2%

• £250,001-£925,000 = 5%

• £925,000-£1,500,000 = 10%

• £1,500,000+ = 12%

If you have a purchase price in mind, the government's SDLT calculator can help you work out exactly what you’ll need to pay. Remember you will need to add this money onto the cost of buying a home.

Is there any additional stamp duty help for first time buyers?

As of July 2021, first time buyers purchasing a property up to £500,000 in value won’t have to pay stamp duty on the first £300,000 of the price. From £300,001 to £500,000 stamp duty will be payable at a rate of 5%.

To qualify, you and anyone you are purchasing with must be first time buyers.

Accessing a mortgage with a 5% deposit.

Until December 2022, the Government is operating a mortgage guarantee scheme. Lenders are being encouraged to offer mortgages with a 5% deposit. With most 5% deposit mortgages having been removed from the market, this could help many potential first time buyers.

Need more help?

With so many changes taking place, it can feel quite overwhelming. To try and help, CreditLadder has produced a ‘how to get a mortgage guide’ which goes through the entire process in plain English!

CreditLadder also runs a free mortgage application service which will tell you how much you could borrow.

Remember, CreditLadder can help you improve your credit score.

CreditLadder can improve your credit position by reporting your rent payments. CreditLadder is the first way to improve your credit score and position across all three of the main Credit Reference Agencies in the UK, namely Experian, Equifax and TransUnion. Building up a high credit score has a lot of benefits, including helping you access finance at better rates - this can also help save you money. CreditLadder also runs a free mortgage application service in partnership with Tembo which will tell you how much you could borrow.

Remember the content provided in this article is for information purposes only and should not be considered as advice.