UK Stamp Duty - Me and my wife want to buy our first house, how much tax do we have to pay?

Governments around the world have changed policies with unusual rapidity and without their typical notice of change due to covid 19 in order to support their economies. In this case the UK government introduced a stamp duty holiday as one of those policies. So no, this is not normal practice.

The UK government first introduced a stamp duty holiday in July 2020 and at the time, said that it was due to end on 31st March 2021. In the March 2021 budget the holiday was extended at its full rate till 30 June 2021 followed by a transition period lasting till 30th September.

The terms of the current stamp duty holiday are that stamp duty has a nil rate for the first £500,000 of any house purchase. It then changes to being a nil rate only for the first £250,000 for any purchase between 1 July and 30 September before it finally reverts to the pre-covid rate of zero only for the first £125,000 of any purchase.

If this is a second home (i.e. you haven't sold your original £40,000 property) then there is a stamp duty surcharge of 3% in England and Northern Ireland, or 4% in Wales and Scotland. That surcharge has not been waived as part of the stamp duty holiday.

There's an additional 2% charge that the government is proposing to introduce from 1 April 2021 if you're not a UK resident. And yes, if you're not a UK resident and you own another home then you would be liable for both surcharges.

Under the pre-covid rules you might indeed have paid around £1,800 in stamp duty on the purchase of a £250,000 property but provided you can complete before 30th September 2021 you'll pay significantly less, assuming the government doesn't change the rules yet again of course.

Short answer: yes this is normal practice. You pay the tax when the transaction takes place. So you need to manage the completion date carefully given that there are dates coming up when the rate of SDLT on your transaction may change.

The “abnormal” part of this is that SDLT doesn't usually change as much as it is going to do this year (see Robert Longson’s answer).

So it’s up to you to determine how much you’re in control of the completion date as this is a key factor in your tax liability. If you are in a chain and it's beyond your or your solicitor’s / estate agents’ influence, you may need to budget for the highest rate of SDLT. If this is unaffordable and you haven’t exchanged contracts yet, you could withdraw. If you’ve already exchanged contracts, the deposit is also at stake which I imagine is a higher amount than the difference in SDLT.