Mon 27 Jan 2020
Are you Buying A House? You Need to Know about Stamp Duty Land Tax!
by naomi fiddes-baron
Stamp Duty is bounded about in virtually every conversation concerning home purchasing, but what actually is it, and why is it important?
Stamp Duty is a tax that is paid every time a house over a certain amount is sold in England and Northern Ireland. In Scotland, this has been replaced by the Land and Buildings Transaction Tax, and in Wales, it is the Land Transaction tax.
Who Pays it?
Stamp Duty Land Tax is paid by the buyer of the property, and the amount paid is determined by the value of the house you are buying.
How Much is It?
Currently, Stamp Duty applies to homes sold for more than £125,000. The amount that you will pay, is a percentage of the house price which increase as the cost of the property increases. This is pretty similar to income tax, where you pay different percentage tax based on different levels of your income. In much the same way, Stamp Duty has percentages applied of 0, 2, 5, 10 and (a maximum) of 12 based on threshold levels of the property value.
It’s really important that you take note of the threshold levels for Stamp Duty amounts.
So, for instance a property selling for £500,000 will pay:
- 0% on the first £125k;
- 2% on the next £125k;
- 5% on the remaining £250k.
This is really important to take note of, because it gives you good negotiating power when offering on a property that is sitting on the cusp of two thresholds.
Who has to Pay it?
We know that the buyer pays the Stamp Duty Land Tax, but which type of buyer is eligible? Well, essentially you pay this tax if you:
- Buy a freehold property;
- Purchase a new or existing leasehold property;
- Purchase a property through a shared ownership scheme;
- Are transferred property or land in exchange for payment; for example, you take on a mortgage or buy a share in a house.
The amount of Stamp Duty paid will differ for some people, in certain scenarios. For example, there are different rules if you’re buying your first home. You get a discount (relief) that means you pay les or no tax if:
- You complete your purchase on or after 22 November 2017;
- The purchase price is £500,000 or less;
- You, and anyone else you’re buying with, are first-time buyers.
If you’re buying a second property that isn’t going to be your main home, you will be charged around 3% over the normal Stamp Duty rates!
When is it Paid?
Stamp Duty has to be paid within 14 days of completion of the sale. Bearing in mind the complexity of this, we think this is definitely a task for your solicitor or conveyancing agent! However, if you’re taking this on yourself, of course you are entirely responsible for making the correct payment.
For a handy calculator of how much Stamp Duty Land Tax you will be liable to pay on the purchase of your next home, as well as more information, visit the government website.