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Overview

Duty Charges for First-Time Buyers

If you’re buying your first home in England or Northern Ireland, there are specific tax rules you should be aware of.

Since September 23, 2022, the initial tax-free threshold has risen to £425,000. This means you do not pay any tax for a property priced at or below this threshold.

If the purchase price is between £425,001 and £625,000, you will need to pay 5% on the portion over £425,000.

For properties priced at £250,000, you will not owe any tax. However, for a property costing £500,000, you would pay £3,750, which applies only to the amount between £425,000 and £500,000.

If your purchase price is £750,000, you’d need to pay £25,000, since that amount covers multiple tax brackets, including the 5% rate applied between £250,000 and £925,000. Keep in mind, this first-time buyer relief does not extend beyond a purchase price of £625,000.

Tax Details for People Changing Homes

If you’re planning to move homes in England or Northern Ireland, the standard tax rules will apply.

As of September 23, 2022, the no-tax threshold for these transactions is £250,000. This means, for properties priced up to this amount, you’ll pay no tax.

For a £250,000 home, no tax is due. For a £500,000 home, you would owe £12,500. This stems from the 5% rate on the portion between £250,000 and £925,000.

If the property’s price hits £750,000, you will owe £25,000, as 5% is due on the amount between £250,000 and £925,000.

Higher Tax for Extra Properties

Owning multiple homes affects the tax you pay for property purchases. If you’re buying a second home or an investment property in England or Northern Ireland after October 31, 2024, the tax calculations change.

For these purchases, tax starts at 5% for properties valued over £40,000 up to £250,000. A £250,000 purchase carries a £12,500 tax bill.

If you opt for a £500,000 property, the tax will total £37,500. This covers the initial £12,500 for the first bracket, and £25,000 for the next one. If your purchase costs £750,000, you’re looking at £62,500 in taxes. This includes multiple tax brackets up to 10% for the amount between £250,000 and £925,000.

These guidelines help you prepare for the financial aspects of buying a home. Whether you’re a first-time buyer, moving to a new place, or adding to your property portfolio.