We all know that buying property involves various costs and fees and it’s important to do the sums in advance so that you understand your budget and there are no nasty surprises. There are many factors to contemplate and understand, not forgetting about those all-important and unavoidable expenses.
Stamp Duty Land Tax is one of the biggest costs for home movers and questions are often asked about the ins and out of the land tax. So to lend a helping hand, we’ve created this simple FAQ!
Interesting Fact: The name ‘stamp duty’ originates in the 17th century and refers to an official stamp attached or impressed on documents, as proof that they were legally binding.
What is Stamp Duty Land Tax (SDLT)?
In basic terms, Stamp Duty is a land tax payable in England and Northern Ireland. It is payable only by the buyer for all freehold or leasehold property. The current SDLT threshold is £125,000 for residential properties and it applies if you pay outright or by mortgage.
In what circumstances does Stamp Duty need to paid?
You pay the tax when you:
· Buy a freehold property
· Buy a new or existing leasehold property
· Buy a property through a shared ownership scheme
· Have transferred land or property in exchange for payment. For example, you take on a mortgage or buy a share in a house
Does Stamp Duty need to be paid when buying a second property?
We’re afraid it does! Since April 2016 there has been an additional rate of Stamp Duty which is applicable for second homes. This means that if you purchase an additional property, even if it’s only owned temporarily, you will be liable to pay extra Stamp Duty.
The additional stamp duty of 3% is on top of the normal Stamp Duty rate, and is imposed on the whole value of properties worth more than £40,000.
The good news is you can reclaim the extra Stamp Duty if you sell your original home within 3 years.
Do ‘first time buyers’ pay Stamp Duty?
Yes, however in 2017 the Autumn Budget gave first time buyers a helping hand by enabling them to claim a discount so that no Stamp Duty is paid on property valued under £300,000, and only 5% is payable on the portion from £300,000 to £500,000.
When or how do I need to pay Stamp Duty?
You must send an SDLT return to HMRC and pay the tax within 14 days of completion. If you have a solicitor or conveyancer, they’ll usually file your return and pay the tax on your behalf and add the amount to their fees. They’ll also claim any relief you’re eligible for, for example if you’re a first-time buyer.
Does Stamp Duty apply to fixtures and fittings?
Stamp duty does apply to fixtures, as these are part of the property itself. For instance, a fitted kitchen or bathroom is a fixture so is part of the property and no deduction can be made to the Stamp Duty. Free standing furniture and appliances, and even carpets and curtains, are classed as ‘chattels’ and if included in the property price a deduction may be possible, although they may need to represent quite a high value to be worthwhile under the current SDLT banded scheme. Your solicitor can advise you further.
How much will my Stamp Duty tax cost?
Stamp Duty Land Tax depends on property price and a number of other factors. The easiest way to find out would be to get an instant Stamp Duty Land Tax calculation on the government website here: https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro
We hope that’s helped clear up some of the common Stamp Duty question marks… For any other Stamp Duty or property-related queries, feel free to call one of our offices in Ash, Alton, Farnham or Guildford where our friendly, knowledgeable teams are more than happy to help wherever possible!