Andrew Bailey, Belvoir’s Sales Director explains Stamp Duty
and how it will affect you when you buy a new home.
If you have a question for our
monthly Belvoir Property Clinic, please send to info@belvoirandover.com
What is Stamp Duty?
If you are buying a home or a piece of land in England which
is costing more than £125,000 (or more than £40,000 for second homes), you will
have to pay Stamp Duty Land Tax (SDLT) on your purchase. Stamp Duty is a tax
paid by the buyer on the purchase price of a property, not on the amount borrowed
via a mortgage.
How much is Stamp
Duty?
If the property that you are buying is your main home, then
the amount you pay is calculated using the following bands:
·
You pay nothing on the first £125,000 of the
purchase price
·
2% between £125,001 and £250,000
·
5% between £250,001 and £925,000
·
10% between £925,001 and £1,500,000
·
12% above £1,500,000
This means that if your home costs £120,000, you pay no Stamp
Duty.
If however your home costs £275,000, then you can calculate
SDLT as follows:
0% payable on the first £125,000 = £0, 2% on the next
£125,000 = £2,500, 5% on the final £25,000 = £1,250
Total SDLT = £3,750
Different rules may apply to leasehold properties, depending
on the type of lease.
Stamp Duty on second
homes
Buyers of additional residential properties, such as second
homes and buy-to-let properties, are required to pay an extra 3% in Stamp Duty
on top of current rate and this higher rate applies to properties bought for
£40,000 or more.
This works out as: 3% payable on the first £125,000; 5% on
the next £125,000; 8% between £250,001 and £925,000, 13% between £925,001 and
£1,500,000 and 15% above £1,500,000
The additional tax is not payable if your second home is a
caravan, mobile home or houseboat.
If you buy a new main residence but there’s a delay in
selling your previous main residence, you will also have to pay the higher
Stamp Duty rates as for a short time, you will own two properties. However,
depending on the circumstances you may be able to request a refund.
Stamp Duty for
first-time buyers
First-time buyers in England qualify for Stamp Duty relief
and do not pay SDLT on purchases of up to £300,000. They will however pay 5% on
properties that cost from £300,001 up to £500,000.
This means that if your first home costs £280,000, you pay
no Stamp Duty.
If your home costs £325,000, then you pay nothing on the
first £300,000, and 5% on the remaining £25,000
Total SDLT = £1,250
If your first home is over £500,000 then you do not qualify
for Stamp Duty relief and you will be expected to pay the standard rate.
Joint ownership and
Stamp Duty relief
If you are married and jointly buying a property, then you
will both need to be eligible first-time buyers to get First Time Buyers Stamp
Duty relief.
Unmarried people can still get a reduction in Stamp Duty but
only if one person is named on the mortgage deed and that person is a
first-time buyer.
You are generally classified as a first-time-buyer if you are
purchasing your only or main residence and have never owned a freehold or have
a leasehold interest in a residential property in the UK or abroad
How is Stamp Duty
paid?
Your solicitor or conveyancer usually submits a SDLT return
for you within 30 days of the completion of the house purchase.
You should expect to pay SDLT on all property purchases, including
those that don’t require a mortgage. So when buying a home, you really do need
to consider whether you are able to afford the tax on top of all the other
costs involved. There are various online calculators which can work out how
much SDLT you will need to pay and lots more information is available on www.gov.uk.
Alternatively, pop into the Belvoir office in Bridge Street, Andover and one of
our team will help you.
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