Stamp Duty is a tax levied on the purchase of a house in England, Wales and Northern Ireland (in Scotland it’s known as Land and Building’s Tax).
It’s a tax based on a sliding scale in terms of the more the property is valued at, the higher the stamp duty will be (and the higher the rate band). For instance, for houses valued up to £125,000 there is no stamp duty while for the next band up (houses valued up to £250,000 it’s two per cent and for houses worth up to £925,000 the stamp duty tax is five per cent. For luxury houses worth more than £1.5m buyers can expect to have to pay Stamp Duty of 12 per cent.
The tax is actually worked out based on which part of the value of the property falls within each band. This means that a £350,000 house would be calculated at 0 per cent on the first £125,000, two per cent on the next £125,000 and 5 per cent on the remaining £100,000. The total Stamp Duty would be £7,500.
First-time buyers given Stamp Duty exemption
One recent exception to the above figures is for First Time Buyers. In an effort to make buying a first home more accessible Chancellor of the Exchequer Philip Hammond decided to give first time buyers a complete break on paying stamp duty for homes worth up to £300,000. Announced at the 2017 autumn budget, it can mean up to a £5,000 saving for those eligible. It’s worth noting that if you’re buying a property as a couple then you both need to be first time buyers in order to access the discount.
Another big Stamp Duty change came in the form of an additional Stamp Duty tax being applied to second homes – of three per cent on homes worth more than £40,000. This too was introduced relatively recently – back in 2016 on a sliding scale until 2020 – and was aimed at cutting back on the number of buy to let landlords in the UK. The exceptions to this rule are houseboats, caravans and mobile homes.
This additional Stamp Duty for second homes can prove problematic if you’re part of a chain where you buy a new property but haven’t yet sold your current home. That’s because it means you have a second home (however temporary!). However you can get a refund if you manage to sell your home within three years (one would hope…) and you claim it within three months of the sale.
For most people though their solicitor deals with the payment of Stamp Duty at the time of the sale (it should be paid within 30 days of completion).
Where does the term Stamp Duty derive from?
Stamp Duty was a form of tax on goods introduced in England as far back as 1694. It was actually a physical stamp (hence the name). It wasn’t until 1808 that it applied to the sale of property and land.
To find out about how stamp duty relates to you, call to speak with one of our experts today (020 8558 1147) or access our Stamp Duty Calculator here.