Whenever people ask us, as buying agents, for budgeting advice we are always keen to mention stamp duty. In all the excitement of searching for and buying a house, this particular expenditure often slips the mind. However, when it comes to more high value properties, stamp duty can be reach quite a substantial sum. It is crucial then, that you factor it into your initial budget calculations. If you are using a buying agent, they should be able to assist you with this.
Formally known as Stamp Duty Land Tax (SDLT), this tax applies whenever you purchase a property worth over £125,000. This figure is known as the stamp duty threshold. Both freehold and leasehold properties are subject to stamp duty, as well as both outright purchases and mortgage arrangements. The total sum must be paid within 30 days, although there are currently plans to reduce this to 14 days from April 2018. Please note, this tax only applies to England, Wales and Northern Ireland. For property in Scotland, you will need to pay Land and Buildings Transaction Tax instead.
Calculating Stamp Duty
There are two main ways of working out how much you’re going to need to pay in stamp duty. Arguably the quickest and easiest way is to use one of the many online stamp duty calculators, such as this one.
However, you can always do it yourself the old fashion way. Using the correct percentages, you just need to find those percentages of the purchase price and add them on, to give your overall price. It is all done in a band system, so you will pay different percentages of stamp duty for different sections of the price.
The Finer Details
With stamp duty, the devil is in the detail. If you are at all unsure, do speak to a buying agent, estate agent or solicitor. If you are purchasing a property as a second home or buy-to-let, for over £40,000, you will need to pay an additional 3% in stamp duty for each band rate. So, 2% becomes 5%, 5% becomes 8% and so on.
One thing to be careful of is buying a new property, which you intend to become your main residence, but not selling your present home at the same time. Essentially, you will own two properties at the same time and so need to pay the aforementioned higher tax rates. However, you may be able to secure a refund should you sell your home within the next three years.
Unfortunately, the exemption for first time buyers that was brought in 2010 has since been revoked. First time buyers now pay exactly the same stamp duty tax as everybody else. You will not, however, need to pay stamp duty when purchasing a caravan, mobile home or houseboat.
Buying Agent Partnership are highly experienced buying agents and have dealt with numerous stamp duty concerns and queries. Contact us on 0330 223 6339 to discuss how we can help you.