Do You Pay Stamp Duty on a New Build?
When buying a new build property, stamp duty payments are similar to existing properties. This means that you can expect to pay stamp duty following the completion of your new build. However, there are instances where you may qualify for stamp duty relief. If this is the case, you can receive a discount or be completely exempt from making the payment.
In this guide, we’ve gathered everything you need to know about paying stamp duty on your new build property.
What is Stamp Duty?
Stamp Duty Land Tax (SDLT) is a fee that is paid after purchasing a property above a certain price. The total price owed depends on the property value, with rates differing across the UK. In England and Northern Ireland, it is called Stamp Duty. In Wales, it is referred to as Land Transaction Tax (LTT) and in Scotland, it is Land and Buildings Transaction Tax (LBTT).
A general rule of thumb is that the higher the property price, the higher the rate of stamp duty will be. It can be between 0% and 16% of the property value. Property rates increase when making multiple purchases or buying an investment property.
When your solicitor pays the stamp duty on your behalf, they will register the change of property ownership with the Land Registry.
Here are the stamp duty rates for each region in the UK:
SDLT Rates in England and Northern Ireland
| House Price | Stamp Duty Rate |
|---|---|
| Up to £250,000 | 0% |
| £250,001 to £925,000 | 5% |
| £925,001 to £1.5 million | 10% |
| £1.5 million+ | 12% |
Use our handy Stamp Duty Calculator to find out how much you owe
Land Transaction Tax Rates in Wales
| House Price | Land Transaction Tax Rate | Additional Property Rate |
|---|---|---|
| Up to £225,000 | 0% | 4% |
| £225,000 - £400,000 | 6% | 7.5% |
| £400,000 to £750,000 | 7.5% | 9% |
| £750,001 to £1.5 million | 10% | 14% |
| £1.5 million+ | 12% | 16% |
Read more on Stamp Duty in Wales: The Land Transaction Tax Explained
Land and Buildings Transaction Tax Rates in Scotland
| House Price | LBTT Rate | LBTT Additional Property Rate |
|---|---|---|
Up to £145,000 | 0% | 3% |
| £145,001 to £250,000 | 2% | 5% |
| £250,001 to £325,000 | 5% | 8% |
| £325,001 to £750,000 | 10% | 13% |
| £750,001+ | 12% | 15% |
There may be higher thresholds for first-time buyers as well as those who are exempt or can receive relief.
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Will I Have to Pay it on a New Build?
Stamp duty must be paid on new build properties in most circumstances. There are often incentives promoted by the government and developers where you may be exempt or receive relief from your stamp duty.
New builds are viewed the same way as any other property. Unless the buyer is a first-time buyer or purchasing in unusual circumstances, the total stamp duty will likely have to be paid.
A stamp duty holiday was issued in July 2020 to boost the housing market, but this was reverted to normal in October 2021. However, a Government announcement made on 23rd September 2022 increased the initial threshold in England and Northern Ireland to £250,000 from £125,000.
How is Stamp Duty Calculated on New Builds?
New build stamp duty has the same rates as existing properties. However, the way they are calculated is slightly different. This is because the stamp duty is based on the land, property rate, and any optional upgrades the buyer has purchased. This can include any fixtures and fittings that have been installed such as new kitchens or any furnishings.
Any additional costs you may have paid to make improvements on your property could push you over a particular threshold. For example, the property may be valued at £245,000 (which would fall under the 0% rate). However, purchasing £10,000 of fixtures and furnishings will push you into the next bracket of 5% as stamp duty will be charged on £255,000.
First-time buyers can enjoy buyer relief as the stamp duty thresholds are higher in England and Northern Ireland, jumping to £425,000. First-time buyers in Scotland have an increased initial LBTT threshold of £175,000. In Wales, the initial Land Transaction Tax threshold is still £225,000.
Example of Stamp Duty on New Builds:
A buyer purchases a property worth £300,000 and then spends an additional £10,000 on fixtures and fittings around the house, including a new kitchen. This makes a total of £310,000 spent. The stamp duty will then be calculated on the £310,000 amount, which is 5%. This means that the buyer will owe £15,500 in stamp duty fees.
If the buyer is a first-time buyer, they will not have to pay any stamp duty thanks to the £425,000 threshold.
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How to Avoid Paying Stamp Duty on New Builds?
You may receive relief or are exempt from paying stamp duty on your new build in certain circumstances. Make sure you consult with your solicitor if you are unsure whether you are exempt or due to receive relief.
Here are some instances to avoid paying stamp duty in full or in part:
- If the property has been left in a will
- A freehold property has been purchased for under £40,000
- The property has been transferred due to civil partnership dissolution or divorce
- Negotiating the purchase price down below a threshold
- Asking the developer if they can remove the cost of fixtures and fittings from the total amount
Read more on How Much Can You Negotiate Off a New Build House?
When Do You Pay Stamp Duty on a New Build?
The stamp duty land tax return must be paid within 14 days of completion on a new build property. This can be paid on your behalf by either the estate agent, conveyancer, or conveyancing solicitor. Most representatives will pay stamp duty on the same day as completion and add it to their fee total.
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New Build Conveyancers
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Not every conveyancer offers new build services. Therefore, it’s essential to check with your conveyancer that they can assist with your new build property transaction.
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