*For the most up to date information on this topic, please see: SPRING BUDGET 2021 – Stamp Duty Land Tax Holiday Extended
Stamp duty. That doesn’t sound like fun…
It’s not. Stamp Duty Land Tax (SDLT) is a tax you pay when you buy a property in England or Northern Ireland. In Scotland, you pay Land and Buildings Transaction Tax (LBTT), while in Wales it’s Land Transaction Tax (LTT).
A tax on something you’re paying for – rather than income received?
Yes – think of it like ‘VAT for property’: the higher the price of your new home, the more you pay. However, it’s not all bad news. Recently, in a bid to restart the property market after the Coronavirus lockdown, the Government announced tax cuts which means, in England and Northern Ireland, you won’t have to pay Stamp Duty on the first £500,000 of a property’s purchase price. This will last until March 31, 2021.
How is Stamp Duty worked out?
If you’re buying a property that costs £700,000, you won’t pay Stamp Duty on the first £500,000. However, a rate of five percent applies to the remaining £200,000. So that means you’ll pay £10,000 to HMRC (HM Revenue & Customs) on the purchase. In Wales and Scotland, there’s nothing to pay on the first £250,000.
Is the Stamp Duty rate always five per cent?
No, like other taxes there’s a sliding scale of payments based on the cost of the property you’re buying. Between £500,001 to £925,000 the rate is five percent. Then from £925,001 to £1.5m, it’s 10 percent. Above £1.5m, it’s 12 percent. However remember, if you’re buying a property for £1.7m you’d only pay 12 percent on the portion above £1.5m. Not the whole price.
When do I pay it?
Once contracts have been exchanged you have 14 days to file your Stamp Duty return to HMRC, even if you’re not paying any. You’re ultimately responsible for this, but your solicitor will be able to file it for you as part of the house-buying process.
The house I’m buying is just over £500,000. Can I ask for a reduction to £499,999 so I don’t have to pay Stamp Duty?
As long you’ve not exchanged contracts, you have every right to ask for a reduction in price. Some sellers may be willing to accept a little less to get the deal done but obviously that’s up to them. You might also lose the property.
Is there anything else I should watch out for?
If you’re looking to buy a second home ( e.g. for buy-to-let), you’ll have to pay an additional three percent on top of current Stamp Duty rates and that includes the first £500,000. This means you’ll pay at least three percent of the property’s value on any purchase.
This all sounds a little complicated…
The key thing is to factor in Stamp Duty from the start of the property-buying process. When you apply for a mortgage with an independent advisor like us at Charles Cameron & Asssociates, we’ll make sure you know about all the extra costs you might face – such as Stamp Duty – and adjust your application accordingly. That way there’ll be no nasty surprises when you’re on the verge of moving to your new home.
For the most up to date information on this topic, please see: MINI BUDGET GROWTH PLAN 2022 – Stamp Duty Land Tax.
For more information visit: https://www.gov.uk/stamp-duty-land-tax