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Stamp Duty: What you need to know

If you live in England, Northern Ireland or Wales and have just bought a property or piece of land that is over £125,000, you will also have to pay Stamp Duty Land Tax or SDLT. If you are buying a second home, that stamp duty kicks in earlier at £40,000.

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You are liable to pay stamp duty whether your property is classed as a leasehold or freehold and irrespective of whether you buy outright or have a mortgage. There is no exemption nowadays for first time buyers as there used to be in the past.

Stamp Duty Rates

There are different rates of stamp duty depending on the value of your property. For a first property, this runs as follows:

  • If your property is bought for less than £125,000 you pay nothing.
  • Over £125,000 and below £250,000 the rate is 2%. So if you have a home that is bought for £150,000 you will pay £3,000 in stamp duty.
  • Above £250,000 and below £925,000 the rate is 5%.
  • Above £925,000 and below £1.5 million the rate is 10%.
  • Over £1.5 million the rate is 12%.

Stamp Duty for Second Homes

For those who are buying a second home, the rates of stamp duty have increased for properties over £40,000. That means you need to add 3% to each of the above rates.

This is something that you also need to be aware of when you are buying and selling a home – if the sale of your existing home is delayed and you are suddenly stuck with two properties you will be liable for the higher rate of stamp duty for the new one. The good news is that you can get a refund if you sell your property within three years and claim in the appropriate time (within three months of sale or within 12 months of your self-assessment tax return if you are self-employed).

When to Pay Stamp Duty

When you have completed the purchase of your home, you need to submit the return for stamp duty within 30 days and pay what is owed. Failure to do so can mean you get fined by the tax office. You can do this yourself but most people find it more expedient to let their conveyancing solicitor handle it.

Note: Even if your home is valued under the £125,000 limit you need to submit a return.

Are there any exceptions?

There are few exceptions when stamp duty doesn’t have to be paid if the property is over £125,000. If the asking price for a property goes a little over the band you can always ask the estate agent and vendor to reduce the amount they are asking for. The two main instances where stamp duty doesn’t have to be paid are when deeds are being transferred for a divorce settlement or they are being transferred as a gift or as part of the settlement of a will.

That doesn’t include if you exchange properties with someone else – you’ll each have to pay your share of the duty for the property you are accepting even if actually money is not involved.

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