If you work in the moving industry, are planning to buy a new house or just plain read the newspapers, you’ll be all too familiar with stamp duty at the minute.
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What is stamp duty?
Stamp duty (officially known as Stamp Duty Land Tax, or SDLT) is a tax charged by the government for the purchase of property, whether that be a plot of land or a house.
The stamp duty you pay goes towards covering the cost of the necessary legal documents involved in the transaction.
Why should I care?
Maybe you shouldn’t. Although, if you’re reading this article it’s likely you do.
However, to be clear, the people who need to take an interest in the stamp duty news are people looking to buy property. Especially people looking to get a foot on the property ladder, a.k.a. first-time buyers.
This is because, in late 2017, the UK government introduced stamp duty relief for first-time buyers, meaning they could potentially make savings of up to £5000 when they purchased a house, flat or plot of land.
How? Well, stamp duty was removed for the purchase of property worth up to £300,000. On property between £300,001 and £500,000, buyers would have to pay 5%, meaning the maximum paid on a £500,000 property would be £10,000.
What about stamp duty for non-first-time buyers?
Stamp duty rates for people who already own property, are looking to buy a second home or a buy-to-let building is different. (For info on second home or buy-to-let properties, please go here.)
For people who already own a home and are looking to move house, stamp duty is charged as follows:
- Up to £125,000, you pay 0%
- From £125,001 to £250,000, you pay 2%
- From £250,001 to £925,000,you pay 5%
- From £925,001 to £1.5 million, you pay 10%
- Above £1.5 million, you pay 12%
You’ll only pay the percentage associated with each band for the amount of money that falls within that band. For example, if you want to buy a house worth £300,000, you’ll pay nothing on the first £125,000, then 2% on the amount which falls into the second band (so, 2% of £125,000, which is £2500).
Finally, you’ll pay an increased rate of 5% on the remaining £50,000 which falls into the third tier of stamp duty taxation (another £2500).
This will bring your stamp duty total on a £300,000 property to £5000.
Is this good or bad?
In a nutshell, it’s great for first-time buyers looking at property valued at £300,000 or less, because they’ll no longer pay stamp duty at all. Generally, it’s pretty good for most first-time buyers.
However, it doesn’t affect those already on the property ladder or those wanting to buy second homes or buy-to-let property.
In fact, that’s why many have called for stamp duty to be made exempt across a wider range of circumstances, in order to get the housing market out of its slump. (Boris Johnson also agrees with that school of thought!)
Meanwhile, others believe that cutting stamp duty for those who are downsizing should be considered.
Speculation aside, these new stamp duty reforms look set to stick. Whether they’ll be a help or a hindrance when it comes to reviving the housing market remains to be seen though.
What do you think to the changes though? Do the recent stamp duty reforms affect you? Let us know in the comments below!
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