In the house buying process, you will hear about Stamp Duty and it will make up a good proportion of your house moving budget. We have tried to explain clearly what Stamp Duty is, and how it could affect you and your house move.
What is Stamp Duty and why do we pay it?
Paying Stamp Duty is a legal requirement if you are buying a house (or land) over a certain price (known as a threshold). The charge was originally introduced in the 1600s as a fixed rate property tax and has changed many times over the years. The amount of Stamp Duty Land Tax (SDLT) is now dependent on a number of factors, including the value of the property or land you are buying.
Who pays Stamp Duty and when is it due?
Anyone who is buying a freehold property, a new or existing leasehold, buying a property through shared ownership or is transferring property in exchange for payment (like taking on a mortgage) will need to pay this tax, as long as the purchase price is over the threshold.
If a Stamp Duty payment is required, it is on the buyer to pay it, and is due when the transfer of ownership has been completed (otherwise known as your completion date). You have 14 days to pay it from this date, but your solicitor may sort this out and include this as part of their bill. There are certain circumstances where you do not need to pay Stamp Duty which are detailed below.
How much is Stamp Duty?
This is where the thresholds we touched on earlier come in. There are many things that can affect the amount of Stamp Duty you pay. Firstly, if you are buying a residential or non-residential property. Then if you are buying the house as your main home, or as a second property, as well as the price you are paying for the land or property.
We’ve put a quick run down below for residential, main properties, or you can use the Government’s Stamp Duty calculator if you would prefer to work out the exact amount of tax for your situation.
If you’re buying for your main home:
- Up to £125,000, you won’t pay anything
- Between £125,001 and £250,000, you will pay 2%
- Between £250,001 and £925,000, you will pay 5%
- Between £925,001 and £1.5 million, you will pay 10%
- Anything over £1.5 million, you will pay 12%
So for example if you’re buying a property for £250,000, you won’t pay anything on the first £125,000, and you'll pay 2% on the remaining £125,000. Meaning you pay £2,500 in Stamp Duty.
How do you avoid Stamp Duty?
Looking to avoid paying out Stamp Duty if possible? There are certain circumstances where you don’t have to pay it. For example, if you (and anyone you are buying with) are first-time buyers, and your purchase price is below £500,000, you will be eligible for Stamp Duty relief.
If there is a transfer of property in pursuance of separation, divorce or dissolution you will also be entitled to a Stamp Duty discount. You can also avoid or see a discount in Stamp Duty if the property is left under the terms of a will, or if you gift your home to someone and there is no outstanding mortgage on the property.
If you are looking for new build properties in the Midlands, Jelson Homes has over 130 years experience, and has many developments to choose from.