What is stamp duty, and how does it affect me?
Stamp duty, otherwise known as stamp duty land tax, or SDLT is an area that a lot of people don’t know a lot about. The chances are you will need to pay stamp duty at some point if you’re a homeowner. With that being said though, the rules and regulations often change, so it can be hard to keep up with the latest stamp duty laws. There are a couple of changes being made at the moment though that will be beneficial to first-time buyers, or those looking to purchase a new property in the near future.
If you purchase a new property between the 8th July 2020 and the 31st March 2021, you won’t need to pay any stamp duty on it unless the property value exceeds £500,000. This is regardless of if you are a first-time buyer or not. If the property value exceeds £500,000, you will have to pay the standard rate of stamp duty for the property, which depends on how much over the threshold that is. This means that now could be a good time to purchase a new property, as these benefits will not be available after the 31st March 2021.
These stamp duty rates can be confusing, as well as an unwelcome surprise if you’re not aware of them beforehand. There are set stamp duty rates for both your first home and any additional properties. In cases where you only own one property, you won’t need to pay any stamp duty at all if the value is under £500,000. If it is worth between £500,001 and £925,000, you will pay a 5% stamp duty rate on the portion over £500,000. Similarly, this goes up to 10% for properties up to £1.5 million, and up again to 12% for any property over £1.5 million, in each of these cases it’s still true that you pay nothing on the first £500,000. So, as an example, for a house valued at £750,000 you would pay nothing on the first £500,000 and 5% on the portion over the ‘free’ allowance, in this case £250,000 x 5% = £12,500.
What if you purchase a second home though? Upon purchasing a second property, you will have to pay a 3% higher rate regardless of property value. This means that for properties under £500,000, you will need to pay 3% in stamp duty. This 3% increase is also in place for the other price bands, which means for properties exceeding £1.5 million, you will be paying a 15% stamp duty rate.
There are new rules coming into place on the 21st April 2021 for first-time buyers. If you or anyone you are buying the property with is a first-time buyer and the property value is less than £500,000 then you will be entitled to pay less, or in some cases no stamp duty at all. This is great news for people looking to buy a house for the first time, as all the costs can add up fast, so having one less thing to worry about is a real bonus.
If you are looking to purchase a new home in the near future and you’re still unsure on how stamp duty will affect you, then why not get in touch with one of our financial advisers here at Chilvester Financial. Our team of professionals will be able to give you just the advice you need on everything stamp duty related, so if you feel that you need that extra support, then get in touch today for a free, no obligation-consultation.