30 June 2014

What you need to know about stamp duty

What you need to know about stamp duty

What you need to know about stamp duty As house prices continue to climb, the number of people having to pay stamp duty has risen – but what exactly is stamp duty and how does it work? What is stamp duty? Stamp duty land tax (SDLT) is a tax that is levied on homes that cost upwards of £125,000 to buy.

The name ‘stamp duty’ comes from the historical need for a physical stamp to be impressed on a document – although a physical stamp is no longer needed.

How much will I have to pay? The rate of tax that a home buyer will pay on a property depends on the price and the classification of the property as different rules apply for some of other types such as commercial properties.

You will also pay the same rate of SDLT irrespective of whether your property is freehold or leasehold.

The following are the thresholds for paying stamp duty.

Purchase price                      Stamp duty rate Up to £125,000                          0% £125,000.

01-£250,000              1% £250,000.

01-£500,000              3% £500,000.

01-£1,000,000           4% £1,000,000.

01-£2,000,000        5% £2,000,000.

01+                         7% You have to pay stamp duty on the entire amount, rather than the amount that is over each threshold.

So, if you bought your house for £124,999, you would pay nothing, but if you bought your house for £125,001, you would have to pay £1250.

01, not just a penny.

Are there any exceptions? Unfortunately there aren’t many scenarios where you can avoid paying stamp duty.

However, if the property you are looking at only slightly rises above a threshold then it may be worth asking the seller to consider a lower offer.

Other scenarios include transferring a proportion of your home to a partner during a divorce or ‘gifting’ a property – for example through a will.

If you’re a first time buyer looking at purchasing your first home then take a look at our helpful article for more information.

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