All About Stamp Duty
When buying or selling a property, one of the biggest expenses can be Stamp Duty which can end up costing thousands of pounds on top of the selling price so it is really important to bear this in mind when budgeting. The buyer is usually the person responsible for paying Stamp Duty, on properties over £125,000 whether they are freehold or leasehold. First-time buyers used to be exempt from paying Stamp Duty but unfortunately, this was revoked in 2012 so everybody who purchases a home over £125,000 is now responsible. However, if you purchase a new zero-carbon property you may be eligible for tax relief, and also depending on the area.
The cost of Stamp Duty is a percentage of the purchase price of your property, but increases on a scale and can see a large jump depending on the price. So you will be liable for 1% of the cost of a £250,000 home paying just £2500 but pay £1 more and you will end up in the 3% bracket finding yourself responsible for £7500 – a huge difference. This is why properties tend to be priced just below the Stamp Duty banding enabling them to gain a quick house sale. Over £500,000 is then charged at 4%, then properties priced between one and two million pounds have Stamp Duty payable at 5% which could equate to £100,000. Then properties over two million pounds are liable for 7% Stamp Duty. So it could end up being quite costly, amounting to hundreds of thousands of pounds on top of the cost of the house. So it is extremely important that you are aware of the Stamp Duty liable on the cost of your property and factor that in when budgeting.
Luckily Stamp Duty does not apply to removable fixtures or fittings such as carpets, curtains and freestanding appliances or furniture, but it does apply to things such as bathrooms, kitchens and built-in furniture such as wardrobes. So you can save a little money by deducting any removable fixtures from the price of the property that you may have included in the final agreed price of the home. For example, if curtains and carpets have been included in the sale then both you and the seller will need to agree a price for them that will then be deducted from the total in order to calculate the fees owed on Stamp Duty following the sale. And you can’t try and overestimate the cost of any fixtures as you may need to show evidence to HMRC.
It is possible to get a discount or tax relief on Stamp Duty in certain circumstances. For example, if you buy in what is classed as a disadvantaged area you may be eligible, which you can check online to see if you qualify. You can also find out how much relief you could be entitled to depending on the area you have purchased your property in. You will need to pay any Stamp Duty owed within 30 days of the official completion date.
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