Do You Pay Stamp Duty on a New Build?

As everyone who has ever bought a house will know, the entire process can be a bit of a minefield. 

This is especially the case if you’re attempting to get on the housing ladder for the first time as there is always a lot to think about.

As well as actually finding a property you like, you also need to be aware of solicitor’s fees, broker fees (if you’re using them), building survey fees and a whole lot more.

And then there is stamp duty to consider. 

If you’re not familiar with buying property, you might not even be aware of exactly what stamp duty is and when it is required. 

For example, do you need to pay stamp duty on a new build?

In this article, we’ll answer this question explaining everything you need to know about stamp duty including when it needs to be paid.

What Is Stamp Duty? 

First, let’s establish exactly what stamp duty is. 

In short, stamp duty, formally known as stamp duty land tax or SDLT, is a type of tax that needs to be paid when a property is being purchased above a certain price. 

The exact amount that will need to be paid will usually depend on the property value, and what part of the UK you are buying the property in. 

This is because the amount you will need to pay in stamp duty will depend on whether the property you are purchasing is in England, Wales, Northern Ireland or Scotland. 

However, generally speaking, the higher the cost of the property the more stamp duty you will need to pay. Stamp duty money is paid directly to HMRC and it is, essentially, a property transaction tax.

While the rates are subject to change, let’s take a quick look at how much stamp duty you can expect to pay. 

If you’re buying a property in England or Northern Ireland, the rates will be the same. 

At the time of writing the rates are:

If you are buying a property in Scotland or Wales, different rates will apply and you should check this information online before making a purchase.

Furthermore, if you are a first-time buyer you will qualify for something known as stamp duty relief. This means you will likely be exempt from paying any stamp duty. If you are a first-time buyer and the property you are purchasing costs less than £425,000, there is nothing to pay. 

If the property you are buying costs more than this and you are a first-time buyer, you will pay 5% stamp duty on the portion of the property that is between £425,000 to £625,000. For all properties above £625,000 you will pay standard stamp duty rates no matter if you’re a first-time buyer or not. 

Do You Pay Stamp Duty On A New Build?

You will have to pay stamp duty on new builds in much the same way you will for older properties. 

Just as we’ve outlined the rates in the section above, you will have to pay stamp duty when purchasing a new build. The only time this will differ is if you are a first-time buyer and purchasing a new build. Again, in these circumstances, stamp duty will only apply on properties that are worth more than £425,000. 

However, it is worth mentioning that the way stamp duty is calculated differs slightly when it comes to new builds. 

In these circumstances, stamp duty is based on the land, property rate and optional upgrades the buyer has purchased. This can include things such as new kitchens, bathrooms and additional fixtures and furnishings that the property may need. 

So, if the initial property price falls below the threshold of £250,000 (meaning you would usually pay no stamp duty) but has then gone on to spend money on fixtures, fittings or any additional upgrades, these costs will be taken into account and, in some cases, may push you into a higher bracket overall which means stamp duty must then be paid.

When Do I Need To Pay Stamp Duty On A New Build?

Stamp duty must always be paid within 14 days of completion when a property has been purchased. This includes new builds, and the fee can be paid by you directly or on your behalf by the estate agent, conveyancer, solicitor or your broker. Most people will pay their stamp duty bill on the same day that completion takes place and account for it from the beginning of the property buying journey. 

Other than being a first-time buyer where exemptions apply, the only other times where stamp duty can be avoided include:

• If you have inherited a property in a will.
• A freehold property has been purchased for less than £40,000.
• The property has been transferred to you following a divorce or civil partnership dissolution. 
• You have negotiated a final purchase price that is lower than the original agreed price which brings it down to the 0% threshold.

Stamp Duty And Second Homes 

If you are buying a second home, you will also have to pay stamp duty and the fees will vary somewhat.

A property counts as a second home even if you’re not actually going to live there and this could be a: 

• Holiday home (even if it’s abroad)
• A property you are going to rent 
• A property you are buying as a gift for someone 

These rules apply for both new builds and older properties, and if you are buying a second home in England or Northern Ireland you will need to pay: