You may have heard about it, but not actually know what it is. So we took a look at a common question – what is stamp duty?
What Is Stamp Duty?
Regulations may require you to pay Stamp Duty Land Tax (SDLT) if you purchase a house or a plot of land in England or Northern Ireland.
Many factors affect whether or what you may need to pay. Examples include what area of the UK you purchase in, whether you are a first-time buyer, if you are purchasing a second or additional property, and the property’s worth.
When Do You Pay It?
Any deal involving the exchange of property is normally subject to stamp duty. For instance, whether you purchase a share of a property through a shared ownership plan, a freehold property, a new or existing leasehold property, a commercial property, or a buy-to-let property.
There is no SDLT due if the property is beneath a predetermined threshold. If you’re a first-time buyer, for instance, you can also be eligible for a discount (tax relief).
You have 14 days after closing on a home purchase in England or Northern Ireland to pay your stamp duty. This is an obligation to HM Revenue & Customs (HMRC). You have 30 days to send the corresponding payment to Scotland and Wales.
If you work with a lawyer or qualified conveyancer, they will typically take the payment in advance. Then, they will submit the return on your behalf. If it isn’t paid on time, you run the risk of a penalty. You are in charge of making sure it is.
How Much Is It?
On September 30, 2021, the limited Stamp Duty holiday for residential real estate purchases in England and Northern Ireland came to an end. You will pay cumulative stamp duty on all properties in England and Northern Ireland. These percentages will determine the stamp duty rate that you must pay for each component of the property’s worth.
Purchasing a first home
First-time buyers receive a special discount on their Stamp Duty (buyers who have never previously purchased a property, or a portion of a property, anywhere else in the globe). This means that, as long as the price of the house is less than £625,000, there is no tax on the first £425,000. There is no deduction if the property value is higher than £625,000.
So, if you were buying a property worth £260,000, you would pay:
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0% of the value below £250,000 = £0
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5% of the value between £250,001 and £925,000 = £500
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total Stamp Duty payable = £500
Buying a second or additional home
If you’re buying a second home in England or Northern Ireland, the rates for additional properties are higher.
Non-UK Residents
If you purchase a residential property in England or Northern Ireland on or after April 1, 2021, and you are not a resident of the UK, you will be required to pay a 2% extra. 22 look at footnote 2
This indicates that, in comparison to UK residents, SDLT charges are 2% higher on houses purchased by non-UK residents. Purchases of land or structures in Scotland or Wales are exempt from the fee.
In addition to all residential SDLT rates, including zero rates, an extra 2% fee is charged on purchases of both freehold and leasehold homes. There are no exclusions, for instance, if the buyer is a first-time home buyer if the property is priced below the SDLT cap.
Additionally, it raises the SDLT that must be paid on rents when a new lease is granted.
