If you’re looking to buy a house or residential property in England, you must know what stamp duty is and how it works.
What is Stamp Duty?
Stamp duty is a tax you have to pay when buying a residential estate or land in England or Northern Ireland for a determined value. The same thing applies if you are buying a second home and if you own a shared property.
The stamp duty applies to both freeholders and leaseholders of the property. While if you are purchasing a house or property in Scotland, you have to pay Land and Buildings Transaction Tax (LBTT) and Wales Land Transaction Tax (LTT) rather than Stamp Duty. If you are buying additional properties, you will have to pay an additional 3% in the Stamp Duty, on top of the updated charges for each band.
How much is Stamp Duty?
Stamp duty has various price bands. For example, if you are a first-time buyer, the stamp duty cost differs from that of a second-time buyer.
How much is the stamp duty for a first-time buyer?
It can be perplexing to know how much stamp duty a first-time buyer has to pay as it has changed a few times over the past few years
In England and Northern Ireland
There is no stamp duty payable by first-time buyers on the first £300,000 of a residential property. It has also been reduced to 5% for properties between £300,000 -£500,000.
When do you pay stamp duty?
You have to pay stamp duty within 14 days of completion, if you don’t pay the stamp duty tax in 14 days you might get charged a fine or interest.
How much is Stamp Duty?
- Zero for properties upto £125,000
- 2% for the portion of the property price between £125,001 – £250,000
- 5% for the portion of the property price between £250,001 – £925,000
- 10% for the portion of the property price between £925,001 – £1.5Million
- 12% for any portion above £1.5 Million
How much is stamp duty for second homes?
In England, from April 2016, an additional stamp duty came into existence for additional properties (ie if you already own a property and are purchasing another). If you’re purchasing a second home or other property, then you’ll have to pay an extra 3% in the stamp duty charges. These additional charges are applied to the properties purchased for £40,000 or more.
How to avoid stamp duty on a second home?
You do not have to pay stamp duty tax charges on a second home while:
- The estate’s cost is less than £40,000
- if you are left the property in a will
- you buy a new or assigned lease of 7 years or more, as long as the premium is less than £40,000 and the annual rent is less than £1,000
- property is transferred because of divorce or dissolution of a civil partnership
I’m getting divorced and buying a home. Do I have to pay the second home rate?
There are specific rules and regulations for this.
If one of the partners leaves the marital house and a ‘property adjustment order’ exists in the situation to deliver the home over to Partner B, then the additional stamp duty charge does not apply.
If you haven’t arranged a ‘property adjustment order’ – your separation lawyer will help you with this – then you may have to pay the extra stamp duty charges. Although, you can ask for a reimbursement if you sell your share in the marital house in three years of when you walked out.
For further questions related to Lease extensions and property, contact one of our experienced chartered surveyors at Leasehold Valuations.