Moving home can be an exciting, yet daunting, process, and with the Stamp Duty Land Tax (SDLT) system recently seeing major changes, it’s important that movers – whether buying, selling or both - are aware of the possible impact this could have when moving home.
With this in mind, here at Owl Search have taken a closer look at the latest SDLT thresholds and rates.
What is stamp duty?
Stamp Duty Land Tax is a government tax applied on land property transactions over a certain price, charged in bands. The majority of people purchasing a property will be required to pay it, with the tax charged at different rates depending on whether the property is residential, non-residential, freehold or leasehold.
It’s important to note that tax relief may be available for certain types of transaction – whether you’re buying outright or with a mortgage.
Stamp duty for first-time buyers
As of November 2017, stamp duty was abolished for first-time buyers purchasing a home for up to £300,000, with no stamp duty required on the first £300,000 for properties up to £500,000.
First-time buyers purchasing homes for more than £500,000, however, will have to pay the standard rates of stamp duty. The changes have led to significant cuts in stamp duty for the vast majority of first-time buyers – the government says that 80% of first-time buyers will now pay no stamp duty, while 95% of first-time purchasers are expected to benefit overall. A total of £5,000 could be saved by first-time buyers on their stamp duty bills.
The table below demonstrates the new stamp duty bands for first-time buyers:
|
Property price |
Old stamp duty cost |
New stamp duty cost |
|
£200,000 |
£1,500 |
£0 |
|
£300,000 |
£5,000 |
£0 |
|
£400,000 |
£10,000 |
£5,000 |
|
£500,000 |
£15,000 |
£10,000 |
SDLT for home movers
Home movers are liable to pay stamp duty when the sale of the property goes through, with up to 30 days to pay. As a home mover, you won’t pay any stamp duty on the first £125,000 of a property purchase, while there is a stamp duty rate of 2% on homes worth between £125,0001 and £250,000.
For homes worth between £250,001 and £925,000, meanwhile, there is a 5% stamp duty charge. For property worth between £925,001 and £1.5 million, it’s 10%. Anything above £1.5 million is taxed at 12%.
Moreover, an extra 3% rate of SDLT on purchases of additional properties – such as buy-to-let and second homes – was introduced in April 2016, meaning that purchasers will pay on top of current rates for each band.
The table below shows the percentage of stamp duty that purchasers will be charged per threshold:
|
Purchase price |
Standard rate |
Buy-to-let/second home rate |
|
Up to £125,000 |
0% |
3% |
|
£125,001 - £250,000 |
2% |
5% |
|
£250,001 - £925,000 |
5% |
8% |
|
£925,001 - £1.5m |
10% |
13% |
|
Over £1.5m |
12% |
15% |
For a leasehold property, buyers will pay SDLT on the purchase price of the ‘lease premium’ from the rates above. If the total rent over the ‘net present’ value is more than £125,000, you also pay stamp duty of 1% on the portion over £125,000 – this is unless you buy an existing assigned lease.
As stamp duty is an inevitable cost you will face when moving home, knowing the basics as well as the new rates and thresholds is crucial.
Owl Search are here to help you with stamp duty and much, much more. If you are interested in selling and or buying a home in Hertfordshire, Borehamwood, North West London, Central London or any of the surrounding areas, please get in contact with us on 020 3432 3888.
What’s more, we offer a free instant online valuation for sellers who would like an estimate of their property’s current worth.
