Posted on
Thursday, January 30, 2020
Whether you’re buying or selling a home, Stamp Duty Land Tax (SDLT) is something that is sure to pop up during the property transaction.
And, with the stamp duty system seeing major changes in recent years, first-time buyers and home movers need to be clued up on the potential impacts this could have on their transaction.
With this in mind, here at Keys & Lee, we have put together a comprehensive guide of everything home movers will need to know about SDLT.
Stamp duty explained
Stamp duty is a government tax that you must pay when purchasing a property or land over a certain price in England and Northern Ireland.
The tax – which affects the vast majority of property transactions – is charged at different rates depending on whether the property is residential, non-residential, freehold or leasehold.
It’s important to remember that tax relief is available for certain types of transaction – whether you’re buying outright or with a mortgage.
How and when is stamp duty paid?
Homebuyers are required to send a SDLT return to HMRC and pay the tax within 14 days of completion.
Typically, your estate agent (or solicitor) will organise payment of the tax on your behalf on the day of the completion.
However, if you fail to file your return and make your payment within 14 days of completion, you will be charged a fine.
Stamp duty for first-time buyers
Stamp duty was abolished for first-time buyers purchasing a home costing up to £300,000 as of November 2017. This means that if you’re buying your first home for less than £300,000, you won’t have to pay any stamp duty at all – potentially saving up to £5,000. Standard rates for homes costing more than £500,000, however, still apply.
A year later, official records showed that over 180,000 buyers benefited from the tax relief, saving an estimated £426 million in total. The figure is even higher today.
What’s more, as part of the October 2018 Budget, stamp duty relief was extended to first-time buyers who use shared ownership schemes on homes worth up to £500,000. This only applies only to homes purchased on or after November 22 2017.
The table below demonstrates the new stamp duty bands for first-time buyers:
|
Property price |
Old stamp duty cost |
New stamp duty cost |
|
£200,000 |
£1,500 |
£0 |
|
£300,000 |
£5,000 |
£0 |
|
£400,000 |
£10,000 |
£5,000 |
|
£500,000 |
£15,000 |
£10,000 |
Stamp duty for home movers and landlords
Home movers do not need to pay any stamp duty on the first £125,000 of a property purchase. However, there is a stamp duty rate of 2% on homes worth between £125,001 and £250,000. Homes worth between £250,001 and £925,000 have a 5% stamp duty charge.
Meanwhile, there is a 10% stamp duty charge for properties worth between £925,001 and £1.5 million. Anything above £1.5 million is 12%.
Additionally, a 3% stamp duty surcharge on additional properties – such as buy-to-lets and second homes – was introduced from April 2016, meaning that purchasers pay on top of current rates for each band.
For a leasehold property, however, buyers will pay SDLT on the purchase price of the ‘lease premium’. If the total rent over the ‘net present’ value is more than £125,000, you also pay stamp duty of 1% on the portion over £125,000 (unless you buy an existing assigned lease).
The table below shows the percentage of stamp duty charged per threshold/the purchase price of the lease premium:
|
Purchase price/lease premium or transaction value |
Standard rate |
Buy-to-let/second home rate |
|
Up to £125,000 |
0% |
3% |
|
£125,000 - £250,001 |
2% |
5% |
|
£250,001 - £925,000 |
5% |
8% |
|
£925,001 - £1.5m |
10% |
13% |
|
Over £1.5m |
12% |
15% |
Currently, things are up in air about the reformation of stamp duty. However, with the possibility of a stamp duty cut in the upcoming March Budget, we have no choice but to take a wait-and-see approach.
Whatever the case, our team at Keys & Lee can assist buyers, sellers and home movers with stamp duty and much more. For more information on selling and/or buying in Romford and the surrounding areas, please contact us on 01708 766 241.
You can also request a valuation on our website to see how much your home could be worth on the current market before you come to sell.
