Are you a first-time property buyer or have no idea about stamp duty? This is a fact of life for any property buyer and this article will unearth everything about stamp duty and make it known to you.
What is Stamp duty?
Stamp duty land tax (SDLT) is the tax on all property and land transactions. At a very basic level, stamp duty is the tax levied on a number of acquisitions which include selling cars, real estate, and other assets to a business. The tax can also be levied on some insurance, gifts, copyright, patent, securities and home loans. The transfer of documents can only be legally enforced if they are stamped, the stamp shows the amount of tax (stamp tax) paid.
Who pays the tax?
All land transfers and sales of property including the properties received as gift attracts a stamp duty. The circumstance of the sale or transfer determines who between the purchaser and borrower is to pay the tax. However the following concessions (exemptions) may apply depending on your location or state.
- Deceased estate
- Family farm
- Young farmers
- First time buyers
- Off-the-plan sales
- Principle place of residence
When you swap properties and no cash is involved you will have to pay tax. Even if you buy the property via mortgage or outright buying the tax still applies.
The only time you won’t be required to pay the tax is in case of divorce or separation. You will only pay the tax when you transfer shares of the property to the other partner or sell the property to a third party.
First-time buyers and stamp duty
If you are first-time property buyer you will pay the same rates of tax as everyone else. However, those buying a home will not be asked to pay anything if its value is below £125000.
If the value is more than £125000, your stamp duty will be charged on percentages that increase proportionally to the value of the property.
When do you pay stamp duty?
When buying and transfer of property is completed, you will have to pay the tax within thirty days of the completion date. This date is usually referred to as the effective date.
In some cases the tax can be paid earlier. For example if payment of the property is done before completion or you decide to move into your new home before completion, then the 30 days period starts on that specific date.
A conveyancer can handle tax payment on your behalf. However, it’s your full responsibility to ensure the right amount of tax is paid to the relevant authorities.
How much is stamp duty?
Stamp duty has several rate bands which vary depending on your country of residence and the value of the property. Each band has a percentage of the tax levied, to get the correct amount of tax you calculate the given percentage of the part of property price falling in each band. The table below gives an example of each band and their respective rates.
|Minimum property purchase price.||Maximum property purchase price||Stamp duty rates|
|Over £1.5 million||12%|
If you bought a property worth £175000, you will be required to pay (2% 0f 50000) = £1000 as the stamp duty land tax.
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