When purchasing a property, it is essential to know the additional costs involved. One sizable cost that is crucial to be aware of is stamp duty, a tax applicable on property purchases. When you purchase a residential property in England or Northern Ireland, you’ll usually need to pay Stamp Duty Land Tax (SDLT). In Scotland, you will pay a Land and Buildings Transaction Tax; in Wales, the tax is called Land Transaction Tax. We are looking specifically at SDLT in this article. The tax you’ll need to pay is based on the property’s purchase price. Read on to learn more about why you need to pay stamp duty and what it will cost.
What is Stamp Duty?
Stamp duty is a tax that is payable on property transactions. It is levied by the government and is generally due upon completion of the sale. The charging of Stamp duty has a long history, with variations and exemptions occurring at certain times.
Most recently, the government significantly raised the thresholds during the Covid-19 pandemic, but, sadly for current buyers, these have been reduced again.
Do new build homes attract stamp duty?
Stamp duty for a freshly built new home was abolished in 2017 to encourage people to buy newly built properties. This exemption has ended, and stamp duty is again payable on a new build home (since 1st October 2021).
So, if you’re planning on purchasing a new build home, it’s important to factor stamp duty into your budget. The tax you’ll need to pay will depend on the property’s price.
How much does Stamp duty cost?
The amount of stamp duty you will pay will depend on the property’s purchase price and your circumstances.
The current thresholds are residential properties are:
Additional portion taxed
0 to £250k
Up to £925k
£250k to £925k
Up to £1.5 million
£925k to £1.5 million
Above £1.5 million
£1.5 million and upwards
See official HMRC website for residetaial rates.
For example, if you’re buying a property worth £350,000, you’ll need to pay a stamp duty of £5000. This is calculated as zero on the first £250,000, 5% on the next £100,000. Total SDLT due: £5,000.
Do first-time buyers pay Stamp duty?
Currently, first-time buyers do not pay stamp duty on properties worth up to £425,000. If the property you’re buying is worth more than this, you’ll need to pay stamp duty on the portion above £425,000. So, if you’re buying a property worth £450,000 as a first-time buyer, you’ll need to pay stamp duty of £1,250. This is calculated as zero on the first £425,000, 5% on the remaining £25,000 (£1,250), for a total SDLT of £1,250. As you can see, this can be a significant saving over the £8,750 that a regular buyer would pay.
If you are planning on purchasing a property, it is important to factor in the cost of stamp duty. The amount of stamp duty you’ll need to pay will depend on the property’s purchase price and whether you are a first-time buyer. See estate agents in Lichfield.