We'll be covering off some of the purchase costs you'll need to consider when purchasing a property purchase, this week we'll be covering Stamp Duty.
What is Stamp Duty?
Stamp Duty Land Tax (SDLT) is a government tax that is charged when you buy a property. Rates are dependent on the price of the property. There are different rates if you are buying a second home or a buy-to-let property. In most cases, first-time buyers get a discount, or they do not have to pay stamp duty.
The rate of stamp duty you pay depends on the type of property, and whether it is residential or non-residential.
The reason that you have to pay, or stamp duty is to cover the costs of legal documents required when you purchase a property.
Stamp Duty is normally more than is needed to cover the costs of the documents – the government mainly use SDLT as a means of gathering revenue, rather than simply processing paperwork.
To get certain documents such as a certificate of Land Ownership you will need to submit your stamp duty. The HMRC will not issue the certificate without your stamp duty receipt.
Paying Stamp Duty
HMRC need to receive payment of Stamp Duty within 30 days of completion. To pay, you simply fill out an SDLT return and send it to HMRC. Your solicitor normally handles this for you at the same time they manage the transaction and submits the money to HMRC after completion.
Stamp Duty for Buy-to-Let
Buy-to-Let Stamp Duty rules mean that if you are buying an additional property, you will have to pay an extra 3% in Stamp Duty. This includes Buy-to-Let landlords and those buying second homes and holiday homes.
Second Property
If you buy a new main residence but there’s a delay in selling your previous main residence, you’ll have to pay the higher Stamp Duty rates as you’ll now own two properties.
If you’re buying a main residence and you’re not a first-time buyer, you’ll pay Stamp Duty at the standard rates. This includes people who previously owned the main residence, but don’t anymore, and people replacing their current residence with a new one.
Property Value SDLT Rate 2019 - 2020
Up to £125,000 0%
£125,001 - £250,000 2%
£250,001 - £925,000 5%
£925,001 - £1,500,000 10%
From £1,500,001 12%
Stamp Duty for First Time Buyers
From November 2017, first-time buyers became exempt from Stamp Duty on properties up to £300,000. If they buy a property up to £500,000, they will pay no Stamp Duty on the first £300,000 and only pay on the remaining amount.
Property Value SDLT Rate for First-Time Buyers 2019-2020
Up to £300,000 0%
£300,001 - £500,000 5%
You cannot void paying stamp duty unless you are a first-time buyer. If you attempt to avoid paying stamp duty, it is the same as tax evasion. If it is brought to the HMRC attention that you did not pay tax, then you will be forced to pay for it with added penalties or charges.
You can only reclaim Stamp Duty if you’re eligible for a refund. Autumn 2018 budget first-time buyers of shared ownership properties worth up to £500,000 receive full Stamp Duty relief. The chancellor has granted this relief retrospectively, therefore first-time buyers who purchased a shared ownership property worth up to £500,000 on or after 22nd November 2017 can claim back Stamp Duty.
Want to know more about how stamp duty can affect you? We will happily recommend you to a tax professional who can look at your individual situation. Feel free to call us on 01702 864848.