Do You Pay Stamp Duty When You Build Your Own House?

There’s a whole host of things to keep in mind when you buy property — but what about when you buy land and build your own home? Are the rules and fees the same?

If you’re thinking of building your own home, you’ll likely be totting up all of the costs so you can better manage them during the process. One such cost associated with buying property is stamp duty — so let’s explore the ins and outs of this fee for self-builds.

Do you pay stamp study on a building plot?

Put simply, Stamp Duty Land Tax is a tax you may have to pay when you buy a residential property – be it a building or land – in England costing over a certain amount.

To help them get on the property ladder, eligible first-time buyers have an exemption from paying Stamp Duty on properties up to the value of £425,000. After that, they’ll have to pay stamp duty.

The property price threshold after a first-time buy exemption is £250,000 – so if building plots and land cost more than £250,000 you do have to pay. Keep in mind, too, that normal residential land tax rates apply if:

• The land is already in residential use (say, if you’re going to demolish an existing house)
• Building has already commenced on the plot.

How much stamp duty do you pay for a self-build?

Remember that you only pay stamp duty on land or property over £250,000. If you’re buying over that threshold, then you pay stamp duty based on the cost of the property — this is also known as the ‘value’ or ‘consideration’. This includes payments that you make for the property which are non-monetary, like goods, work, services, or the release or transfer of a date.

So even if you paid a reduced cost for the land in exchange for a service, you would still have to pay SDLT on the cost including the value of that service. The Government provides useful information on working out the ‘consideration’ that stamp duty is due on, here.

Stamp duty rates

As of September 2022, the Stamp Duty rates became:

• Zero on properties below £250,000
• 5% on properties from £250,001 to £925,000
• 10% on properties from £925,001 to £1.5 million
• 12% on any property costing more than £1.5 million

For example, if you bought a plot of land in January 2023 costing £450,000, you would pay 5% SDLT — or £10,000.

Surcharge for additional property

If you already own a residential property then you will usually have to pay an extra 3% on top of the usual rate of SDLT.

You don’t have to pay this if the property you are buying will replace your old residence and you sell it within 36 months. If you don’t manage to sell your other home within 36 months, then you could be charged the 3% but might be eligible for a refund.

Use the Stamp Duty Land Tax Calculator for a clear idea of what you will need to pay.

How to pay stamp duty

Paying stamp duty is usually more straightforward than it sounds — your solicitor will typically sort out the payment for you. They’ll do the Stamp Duty return for you even if you wind up not having to pay anything.

Whatever you do, just make sure you file your return and pay any dues within 14 days of completion.

Here for your self-build journey

If you’re looking to buy land and build the property of your dreams, why not get inspired by our previous private commissions?

At Aspire, we work with people across the South East of England to bring their visions to life. Learn more about what we do here or, in the meantime, take a look at our luxury property blog.