What is Stamp Duty and what will it cost?

When buying a property over a certain price, stamp duty is payable to the HMRC 30 days from the date of completion or you may risk a fine. Your solicitor, conveyancer or legal adviser will usually recommend that that they sort this out for you and they will ensure that you don't miss this deadline. Some buyers, in occasional cases prefer to add on the Stamp Duty payment to their mortgage. Please speak to you financial adviser to see if this something your lender would consider.

What were the major changes to UK Stamp Duty in the last few years?

Stamp Duty Land Tax (SDLT) is a progressive tax that is payable when purchasing a freehold, leasehold or shared ownership residential property over £125,000 in England, Northern Ireland and Wales (separate Land and Buildings Transaction Tax in Scotland). The new SDLT rates were introduced in 2014's Autumn Statement. This introduced a sliding system based on bands/thresholds and are dependent and calculate on the property price. Different SDLT rates and thresholds apply to commercial, non-residential property or mixed use land.

Before 2014 buyers had to pay based on a percentage/rate based on the entire property purchase price. The new rates are now payable only on the part of the property price that falls within each band. As with every tax, there are those who will be better and worse off compared to the previous system.

Stamp Duty Tax Rates as of December 2014 for residential properties purchased by clients after this date.

£0-£125,000  
0%
£125,001-£250k
2%
£250,001-£925k
5%
£925,001-£1.5m 
10%
£1.5m+
12%

Source: HMRC

How to calculate the new Stamp Duty rate?

For example, if you bought a property for £850,000 you would you pay no stamp duty on the first £125,000, then...

  • 2% on £125,000 to £250,000 and
  • 5% above £250,000

(eg: £800,000 - £250,000 = £600,000 x 0.05 = £30,000 + £2,500 = £32,500).

As the property price increases the rate of pay increases within a certain tax bracket with percentages rising when a higher price threshold is reached. Under the new SDLT property over £925,000 - £1.5m will be taxed at a rate of 10% compared with 5% in 2014.Sin in most cases if you are purchasing a larger value residential property you will be far worse off under the new scheme.

Buy-to-let property and second home Stamp Duty Rates.

From April 2016, property buyers in England and Wales will have to pay an additional 3% on each stamp duty band. To discuss buy to let property then please feel free to contact us and we can give you professional advice on the best areas in Thanet to achieve the best yield and returns on your investment.

Buy-to-let and second home tax bands

Buy-to-let / second home rate (From April 2016)

£0-£125,000  
3%
£125,001-£250k
5%
£250,001-£925k
8%
£925,001-£1.5m 
13%
£1.5m+
15%

Source: HMRC

Can I reduce Stamp Duty?

As stamp duty is only payable on the land purchase, any removable fixtures and fittings, or chattels, for example freestanding wardrobes, sofas, fridges, carpets and curtains, are not subject to SDLT and can, therefore, be subtracted from the total property price. One must always remember that this is a tax and therefore HMRC look closely at what is being claimed on property transactions and what is taken off the agreed asking price. It must be deemed reasonable. Please ask advice of your solicitor/conveyancer in relation to claiming money the agreed price off to lower stamp duty. Please remember that fitted items such as bathrooms and fitted kitchens form part of the property and are all subject to SDLT. If a seller is willing to leave certain chattels, you should agree to pay a reasonable amount between yourself and the vendor and subtract it from the agreed purchase price.

Who pays Stamp Duty?

Stamp Duty is paid by everyone purchasing a residential or non-residential property in England, Northern Ireland and Wales, including overseas buyers, companies and overseas clients.

We can give you advice or recommend professionals.

We only recommend the best professionals to you. Cooke & Co are dedicated to recommended excellent financial advisers, solicitors, surveyors , conveyancers, accountants and legal representatives who we have worked with regularly over a number of years and honestly feel that they give the best advice, value for money and are professional whilst meeting our core values of honesty and integrity. Should you require a recommendation, quote for conveyancing, meet with a financial adviser or have any questions, then please don’t hesitate to contact one of the Cooke & Co team.