If you’re thinking of buying a house in England or Northern Ireland, you need to be aware of Stamp Duty Land Tax (SDLT).
Stamp Duty Land Tax is something you might have to pay when you purchase a residential property or land in England or Northern Ireland.
Stamp duty is payable on leasehold and freehold properties if you buy outright or with a mortgage.
The amount of stamp duty you pay depends on the value of your property. You pay a percentage based on the price of your house. This increases in bands, just like income tax.
Due to the impact of COVID19 on the economy, the Chancellor of the Exchequer, Rishi Sunak has introduced a stamp duty holiday. The scheme will run until March 31st 2021 in a bid to stimulate the housing market.
During the stamp duty holiday, single property house buyers will pay no tax on properties up to a value of £500,000. Those buying a second home, a buy-to-let or an investment will see some relief from the holiday, but not as much.
Now could be a great time to buy a property. See the difference in rates in the tables below.
New SDLT holiday rates – active until the 31st of March 2021
Regular SDLT rates
You only pay stamp duty on the value of your house that falls within each band. To get an exact calculation you can use the gov.uk calculator on their site. calculator
First-time buyers already had some relief before the holiday. They would pay no stamp duty up to £300,000 (£450,000 in London) and then 5% stamp duty between £300,000 – £500,000. First-time buyers see the benefit if they purchase a house between £300,000 – £500,000.
If you are a first-time buyer, and you buy a house for £550,000 during the holiday you will pay SDLT as below.
0% on the first £500,000 = £0
5% on the last £50,000 = £2,500
Total = £2,500
Before SDLT Holiday
0% on the frst £300,000 = £0
5% on the last £250,000 = £12,500
Total = £12,500
At this price, you will save £10,000 if you are a first-time buyer during the SDLT holiday!
Once you have purchased a property, you have 14 days to file an SDLT return to HMRC and pay your stamp duty.
If you don’t submit your return and pay on time, then you could face penalties and interest.
A solicitor will usually deal with your stamp duty return and any payments for you. You must still submit a return even if you don’t owe any stamp duty.
No stamp duty is payable if a property or land is given as a gift or left in a will.
During a divorce or separation, no stamp duty is paid when a property/ a portion of the property value is transferred to another person.
You can add stamp duty to your mortgage, although, you will need to apply for a bigger loan. This will affect your lifetime value and the amount of interest you need to pay. Your monthly repayments will be bigger so this option is rarely chosen.
If you buy a new house before you have sold your old one, you will have to pay the increased rate as if you were buying an additional home. Although, if you sell the old house within three years you can claim back the extra stamp duty you paid.
If you buy a property from a shared ownership scheme where the lease gives you freehold, you can pay stamp duty in two different ways.
A one-off payment on the total value of the house at first sale. For example, if you own 50% of the property, you will pay as much as you would if you owned the full property. You will not have to pay any further stamp duty if you buy more shares in the property though.
Alternatively, you can pay in stages. If you do this, you’ll pay any SDLT that’s due on the first share of the property you buy. After this, you don’t pay any more until you own 80% or more of the property.
Paying in stages has lower upfront costs, but the costs will likely be higher if you buy more than 80% of your home.
During the stamp duty holiday, it is wise to take the first option if the value of the property is below £500,000, as you will not pay any stamp duty.
If you are selling your home and buying a new one, you will pay 0% stamp duty up to a property value of £500,000.
Additional homes always have higher stamp duty rates. This is to make the property market fairer for those who aren’t landlords. During the SDLT holiday, you’ll have to pay an extra 3% on top of the revised rates if you buy a second home.
SDLT on a new build includes the value of the house plus any extras that can be considered part of the house. Extras include fitted kitchens, fitted furniture (such as wardrobes) etc. A builder will report these extras to your solicitor and they will be included in the total price from which the SDLT is derived.
The stamp duty holiday also applies to overseas and non-UK resident buyers.
Currently, overseas property buyers pay the same stamp duty rates as UK residents. However, from the 1st April 2021, overseas buyers will have to pay a stamp duty surcharge of 2%. This applies if one or more of the buyers is not a UK resident. Meaning now is an ideal time to buy UK property.
The stamp duty holiday could save you tens of thousands. With years of experience and an extensive network of lenders, we will find the right mortgage for you. Why not start your journey now by finding out much you could borrow using our simple calculator below.
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