Property investors and second home owners have finally found out how the new higher rates of stamp duty will add thousands of pounds to home purchases from April.

The Treasury has published a consultation document packed with more than 40 examples and asking for responses to 20 questions about the proposed tax –but only gives until February 1 for responses.

The measure was first announced in Chancellor George Osborne’s Autumn Statement 2015 before Christmas.

He explained the new higher rate of stamp duty would add 3% stamp duty to any home purchase other than the replacement of a main home.

Now, The Treasury has fleshed out his plans with the consultation document.

The new stamp duty rates apply to any home in England or Wales valued at £40,000 or more and are expected to apply to around 10% of property purchases.

Married couples and civil partners are allowed one main home as a ‘unit’, according to the new rules.

The higher rate is calculated like this:

  • A residential investment property is bought for £200,000. Stamp duty is calculated as:
  • 3% on the first £125,000 = £3,750
  • 5% on the remaining £75,000 (the portion between £125,000 and £200,000) = £3,750

Total stamp duty due is: £3,750 + £3,750 = £7,500.

Under the current rates, the stamp duty would be £1,500, calculated as 2% of £75,000 – the amount above the nil rate band of £125,000.

  • A second home is bought for £100,000. Stamp duty is calculated as 3% on £100,000 = £3,000.

Under current rates, no stamp duty would be paid on this purchase.

Investors in Scotland will pay a separate Land and Buildings Transaction Tax instead of stamp duty.

Higher Rates of Stamp Duty Land Tax

Property purchase priceResidential rateInvestment rate
Up to £40,0000%0%
£40,001 to £125,0000%3%
£125,001 to £250,0002%5%
£250,001 to £925,0005%8%
£925,001 to £1.5 million10%13%
Over £1.5 million12%15%

Transactions of less than £40,000 do not require a stamp duty return to be filed with HMRC and are not subject to the higher rates.
Source: HM Treasury