When it comes to buying your new home there are a lot of charges and fees to consider, these range from the costs of moving all your furniture and personal items, e.g. a removals firm or van hire to costs for professional services from solicitors or surveyors. Often you can shop around to get the best deals on these type of moving but one fixed cost you need to keep in mind is Stamp Duty.
A Government Tax
Stamp Duty is a tax charged by the government when you buy a home and it is calculated as a percentage of the final purchase price on the home and must be paid at the time of purchase. When you buy a property the change of land ownership has to be registered with a government agency called the Land Registry, the process of registering your ownership of the land includes requiring a certificate from HMRC which will only be issued when the stamp duty has been paid. Your Solicitor is able to make all these transactions for you, but this is why you must consider the cost of Stamp Duty when deciding how much to spend on your new home. As this is a tax and applied by the government it is subject to change so speaking to a mortgage advisor is a great way to get the latest information on stamp duty and when it applies.
Get Mortgage Advisor Advice
When you are looking for a new home a visit to a Mortgage Advisor is a great resource as they will be able to let you know if stamp duty applied to your property purchase and at what percentage. Stamp Duty is normally applied on a sliding scale with many homes being able to be purchased without paying any stamp duty at all if the purchase price is under the threshold.
Why is it called ‘Stamp’ Duty
This old phrase seems a little out of date in our modern digital world but the name of this tax comes from a time when documents had to be physically stamped to make the contract legal and binding. It is thought that a version of this tax was first introduced in 1694 during the reign of William and Mary. Where he royal seal (or ‘Stamp’) was required to make legal documents valid, like the transfer of ownership of land, a tax was applied initially to raise capital for the war against France.
As the rates for all taxes including Stamp Duty vary from time to time it is worth speaking to your Mortgage Advisor to ensure you have the current correct figure and how they apply to your property purchase. Stamp Duty (also known as Stamp Duty Land Tax SDLT) has a current threshold of £125000.00 for residential properties, this means that you don’t pay any tax on the first £125000.00 of the purchase price or none at all if the purchase prices is less than this. The tax applies in the following situations:
- When you buy a freehold property
- When you buy a new or existing leasehold
- If you are transferred land or property in exchange for payment (e.g. A Mortgage)
- If you buy property through a shared ownership scheme
The current rates for residential properties are:
- Up to £125,000 No Stamp Duty or 0% Applies
- The portion from £125,001 to £250,000 2% Applies
- The portion from £250,001 to £925,000 5% Applies
- The portion from £925,001 to £1.5 million 10% Applies
- Anything above £1.5 million 12% Applies
The rules for non-residential land and property are different so ensure you tell your mortgage advisor what the property will be used for to ensure you pay the right tax and get the right type of mortgage for your purchase. There are also additional rules for additional properties that are not your main home and special rates for corporate or multiple purchase arrangements.
To ensure you have the most up to date information or for help on mortgages and how stamp duty applied to the property you wish to buy contact Mortgageforce Worcester for expert advice on buying your next home.
(Rates Information collated in April 2016) https://www.gov.uk/stamp-duty-land-tax/residential-property-rates