Oliver Whelan gives us an update on stamp duty.
What is stamp duty and how does it work?
Stamp duty is a tax you pay when purchasing land or property in England or Northern Ireland. It’s quite an old tax, and has been around for a couple of hundred years. There have been some changes to the thresholds recently which is why this is an important topic.
What do the recent stamp duty tax changes mean for homeowners?
The mini budget released by the Chancellor last month means that homeowners are likely to pay less stamp duty on their purchases, as the thresholds have changed.
For example, someone selling a property and buying a new home worth £230,000 would no longer have to pay stamp duty land tax on that purchase price. Previously the limit was anything above £125,000. So this is great news for homeowners.
It means that people who are moving home can and will save money. Moving house is expensive enough as it is. If you have a tax on top of that, as well, which is a percentage of perhaps £250,000, it does get quite hefty. People do have to budget for that and factor it into their moving costs.
It’s one of the biggest costs of moving, alongside the deposit, solicitor fees and broker fees.
How does this affect First Time Buyers?
Again, this is going to save First Time Buyers thousands when purchasing their first properties. Previously the threshold was that the first £300,000 was exempt from stamp duty land tax, and that was a fairly new thing which was brought in just a couple of years ago.
That threshold has now been increased by an extra £125,000, taking it to £425,000. It means that any First Time Buyer buying a property up to that limit won’t pay any stamp duty at all.
What are the stamp duty rates now?
These can be found on the government’s website for ease and convenience. The following figures are based on a home mover, where up to £250,000, there’s no stamp duty land tax.
The next bracket from there is £250,001 up to £925,000, where stamp duty is payable at 5%. Going up to the next bracket, from £925,001 up to £1.5 million you would pay 10%, and then anything above £1.5 million is 12%.
What it means is that unless you’re buying at the very top end of the scale, the stamp duty land tax is going to be significantly less than it would have been earlier this year.
How can a mortgage broker help with stamp duty queries?
Stamp duty is very much still part of our job as advisers. When we do our exams to become a mortgage broker, they’re factored into that. That means we can help clients by explaining the thresholds, confirming where to find them and supplying links to the best stamp duty calculators.
One final thing is that you should confirm any stamp duty owed with your solicitor, because they will be the ones that make the final transaction to pay the stamp duty land tax. Your solicitor will tell you exactly how much you need to pay.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.