Chancellor Rishi Sunak put the stamp duty holiday in place in July 2020. The property tax holiday was meant to end on March 2021, however, it was extended and slowly phased out until the end of September. Buyers will not pay stamp duty on properties that cost over £125,000.
So what is stamp duty?
My Local Mortgages has shared their advice on stamp duty land tax for prospective buyers.
Stamp duty is a conditional tax paid when you buy land or a residential property in Northern Ireland and England.
Stamp duty is paid on any property that costs over £125,000, excluding first time buyers.
First time buyers pay stamp duty on property that costs over £300,000, providing the property costs over £500,000 in total.
First time buyers pay stamp duty at the rate of five percent on the remaining amount, up to £200,000.
Second home buyers pay an extra three percent stamp duty on property that costs more than £40,000.
Stamp duty applies to both freehold and leasehold properties whether you’re buying the property with your own money or using a mortgage.
In Scotland, stamp duty is called Land and Buildings Transactions Tax (LBTT).
In Wales, it is called Land Transaction Tax (LTT).
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Why do buyers pay stamp duty?
Stamp duty dates back to 1694 during the reign of King William and Mary.
The tax was drawn up on official documents which officials stamped when they received payment.
The property tax was initially temporary but it was so successful, it remained in place.
Stamp duty today covers the cost of the legal documents for the transaction-process involved in purchasing a property.
You have to pay stamp duty within 14 days of your transaction’s completion date.
If it is not submitted and paid in time, HMRC might charge you penalties and interest.
How to reduce stamp duty costs
It’s difficult to avoid paying stamp duty all together but there are ways to reduce the costs depending on who you’re buying for and how you’re buying it.
If you’re buying a property for someone else, you may be able to gift a deposit to them, meaning the stamp duty for second homes won’t apply.
If you are a first time buyer, you could apply for a First Home Buyer Assistance scheme.
This can ensure you’re exempt from paying the charge.
Another way to reduce stamp duty is by paying less for your property.
Negotiating the price down will mean you pay less stamp duty.
You may be able to claim your stamp duty back.
You can claim back the extra three percent stamp duty additional home surcharge if you sell your main home within three years of buying a second one.
If your purchase is a mobile home – such as a caravan or boat, you will be exempt from paying stamp duty.Internet Explorer Channel Network