If you are buying a property there are so many costs to consider, Stamp Duty being just one of them.
What is Stamp Duty?
Stamp Duty is a form of tax you pay when you buy a residential property or plot of land in England and Northern Ireland. The tax applies to both freehold and leasehold properties. You will pay whether you are purchasing the property outright or with a mortgage.
Does everyone need to pay Stamp Duty?
Up until recently, anyone who purchased a property over the value of £125,000 had to pay Stamp Duty. However this year, as a way to incentivise buyers and keep the property market moving during the Coronavirus pandemic, the government have slashed Stamp Duty rates.
If you have plans to buy your main home before 31st March 2020, you will no longer have to pay Stamp Duty on properties which cost up to £500,000. This will mean a significant saving for many buyers. This Stamp Duty exemption applies whether you are a first time buyer or whether your have previously owned a property.
If you are buying a second home or holiday home, Stamp Duty applies on any property costing over £40,000.
What are the current Stamp Duty rates?
Although you will be exempt from Stamp Duty if the home you are buying is under £500,000 you will still need to pay the tax if your home is more expensive.
The following rates apply:
Homes between £0 – £500,000 0%
Homes between £500,001 – £1.5 million 5%
Homes over £1.5 million 12%
You will only pay Stamp Duty on the proportion of the value that falls into the specific tax bracket. So for example if you buy a home that is worth £550,000, you will pay no Stamp Duty for the first £500k. However £50,000 would be subject to 5% Stamp Duty so your fee would be £2,500. At the old rates, you would have paid £17,500 so you can see why this is a huge incentive for home buyers at the moment.
How do I qualify?
In order to receive the revised rates for Stamp Duty you must have completed your property purchase by the 31st March 2021.
How do I pay the fees?
After your sale has completed, you have 14 days to file a Stamp Duty Land Tax Return, and pay the fee that is due. Your solicitor usually deals with this, however it is your responsibility to ensure that it is completed on time.
If you are eligible for the 0% rates on Stamp Duty due to the value of your property, you must still complete a return, but you will not need to pay anything.
The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Money.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.