Stamp Duty is a tax paid by home buyers on property purchases in the United Kingdom. It is a significant cost to be added to legal fees, surveys, and other necessary expenses when purchasing a home and as a mortgage advisor you're always going to want to make your clients aware of the financial implications of Stamp Duty (do they need to adjust their budget to accommodate it?).
The amount of Stamp Duty paid is dependent on the purchase price of the property; the UK government sets out different tax bands for different property prices, so the more expensive your home is, the higher rate you will pay.
As of 2021, the Stamp Duty tax rates are as follows:
Up to £125,000: 0% Stamp Duty
£125,001 to £250,000: 2% Stamp Duty
£250,001 to £925,000: 5% Stamp Duty
£925,001 to £1.5 million: 10% Stamp Duty
Over £1.5 million: 12% Stamp Duty
First-time buyers in the UK have a lower rate of tax to pay than anyone else on the market, they are exempt from paying stamp duty on the first £300,000 of the property’s value if it is worth less than £500,000. After this they will pay a reduced rate at 5% for the remaining amount between £300,001 and £500,000.
In response to the financial impact of the COVID-19 pandemic, a "Stamp Duty holiday" was introduced on 8 July 2020. This meant that as well as spending our furlough days tanning and day-drinking, sorry I misspelled "YOGA" and "home-schooling" there, until the 30 June 2021 buyers did not have to pay stamp duty on homes valued up to £500,000.
On 1 July 2021, the holiday threshold was reduced to £250,000, which will continue until 30 September 2021 for those already in process; however, from 1 October 2021, Stamp Duty rates will return to pre-pandemic levels.
It is important to note that Stamp Duty is typically paid by the home buyer, or their solicitor, within 14 days of completion. In some instances, such as a bargain transaction or as part of an inheritance, the tax may be reduced or not required. It is always best to consult a professional on such matters to ensure a correct payment of duties.
In conclusion, Stamp Duty is an important tax that must be paid when buying a property in the UK. Its amount is dependent on the property's purchase price and the date of completion. Despite the extra cost, stamp duty is a necessary fee and allows for the functioning of the UK's economy relating to property. Always double check the small print and if you're unsure engage a professional so that you won't be stung by penalties or fines for miscalculated tax payments.
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