Stamp duty has changed. The rates for the purchase of additional homes and Buy to Let homes are going up.
We will go through what you need to know about stamp duty as well as taking a look at some of the newer rates.
What is stamp duty
Stamp duty also known as Stamp Duty Land tax (SDLT) is a tax that you need to pay when you purchase a home. The tax is paid by the buyer not the seller. It applies to both freehold and leasehold properties over £125,000.
Old stamp duty system and rates
Before 2014 stamp duty was a ‘slab tax’. Basically, buyers would pay a higher rate based on the price of the entire property. Since December 2014, the rate has now become progressive. The new rates are payable only on the portion of a property price which falls within each band.
How is stamp duty calculated?
Stamp duty is calculated in the same way as income tax is. The example below shows you how stamp duty is calculated if you’re buying a property for the first time.
- You purchase a property for £300,000
- You pay 0% on the first £125,000 = £0
- You pay 2% on the next £125,000 = £2,500
- You pay 5% on the remaining £50,000 = £2,500
- Your total stamp duty tax = £5,000
Changes to stamp duty rates
The table below shows the change in stamp duty tax. The changes mainly effects people who want to purchase Buy to Let or additional properties. This will come into effect in April 2016
Can I reduce stamp duty?
Stamp duty does not apply to removable fixtures like free-standing furniture, fridges, curtains and carpets. However, it does apply to fixtures and fittings in the kitchen and bathroom and even built in wardrobes as these are seen as ‘attached’ to the property.
One way to reduce stamp duty is by subtracting the cost of all removable fittings from the total price of the property.
However it is important not to exaggerate the cost of these fittings they way people have done in the past. This is because the HMRC are cracking down on this and you could face consequences if found guilty.
When is stamp duty payable
Stamp duty must be paid to the HMRC within 30 days after the day of completion. Your solicitor or conveyancer will generally take care of this.
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