If you buy a property after December 2014, you will have to comply with the new rules for stamp duty. Stamp duty has undergone substantial changes. This article has been prepared, to let you know how stamp duty works, and the amount of tax you will be liable to pay. For further information on selling and stamp duty, we suggest you speak directly with an expert.
Who pays stamp duty and what is it?
* The person, who buys the property, pays the tax. Not the person who is selling to the prospective buyer.
* To give stamp duty its proper title is Stamp Duty Land Tax or (SDLT) for short. It is a tax that you are required to pay when you buy a house.
* This tax affects both freehold and leasehold dwellings over £120,000
How much will I be charged
Stamp duty has changed dramatically, over time. It used to be charged on the whole property price. If you decided to buy a property, for example for £2000,000 you would be duty bound to pay £2,000 in stamp duty. If however, the house cost just one or two pounds more, it would make a jump into the next bracket of the stamp duty, and the amount would rise to £7,000 This unfair structure has ceased. From December 4th, 2014, stamp duty is applicable with a similar process like income tax.
Stamp duty and its scale
Property purchase price Stamp duty rate
Up to £120,000 Zero
Over £120,000 – £250,000 2 percent
Over £250,000 – £900,000 5 percent
We will not involve ourselves with more expensive properties.
If the purchase price is £270,000 the new rules with stamp duty are calculated below.
% for the first £120,000
2% on the next £120,000 – £2,000
5% on the final £30,000 – £1,200
Fixtures and Fittings
* Free standing furniture, carpets and curtains, removable furniture is exempt from stamp duty. However, fixtures and fittings that are attached to the building, such as bathroom and kitchen fittings or built in wardrobes aren’t.
* If you want a smaller stamp duty bill, take off the value of removable fittings from the total price of the property. If carpets are included in the sale of a flat, the buyer and seller must get their heads together so to speak to agree a price.
* Some buyers, have tried in vain to reduce their stamp duty by exagerrating their fixtures value. However, the HMRC has become aware of this scam. The taxman, expects the buyer to justify the value of the fixtures.
Can exceptions be made?
* Charities, could have some relief from stamp duty, when land and property are bought for charitable reasons.
* Check the HMRC website for a full list of stamp duty exemptions, and reliefs.
* Relief from stamp duty could be available when a social landlord who is registered, buys property.
* Zero-carbon homes and flats, under £500,000 have reduced stamp duty.
* Companies, that have registered homes, which cost more than 450,000 have a rate of 15%
When does stamp duty need to be paid?
Within 30 days of the day you are entitled to gain possession of the property. Your solicitor will keep you up to scratch with dates, and make sure you don’t go overdue with your payment. You must however, submit a return form, even if you do not have to pay stamp duty, and the property is less than £40,000.