Buyers can often be caught off guard when it comes to stamp duty land tax (SDLT) so when you are looking for properties it is important to work out how much might be due so you can prepare for it. You can use an online calculator to roughly work it out, but here are some of the factors you may not know about.
First time buyer Stamp duty relief:
- You will pay no stamp duty on the first £300,000 (saving a massive £5,000!) however you will have to pay the stamp duty on the remaining value if it is above this which will be calculated at 5%. For example, if you buy a property for £400,000 it will be calculated as: £400,000 – £300,000 = £100,000 @ 5% = £5,000
- None of the applicants can have ever owned a property; that includes any inherited property or properties that you no longer own
- The property must be worth less than £500,000. If it goes above this value, the full stamp duty will need to be paid. For a property worth £500,001 this would be £15,000!
Other important information regarding stamp duty:
- If stamp duty is due you will need to pay this within 14 days of purchasing your property. Bare this in mind when saving to cover not only your deposit but also your stamp duty & other fees.
- If you purchase a property jointly and the relationship breaks down, one partner may choose to ‘buy’ the other out. In this case, stamp duty may due on the 50% of the property. For example, if a jointly owned property is worth £400,000 and Mr wants to buy Miss out, he pays her £200,000 which is 50% of the value. Therefore, the new sole owner pays £1,500 SDLT (0% of £125,000 + 2% of £75,000) and must tell HMRC by filling in an SDLT return.
- Second properties have a 3% surcharge on stamp duty. This includes buy to lets & holiday homes.
- If you are given property as a gift or inherit it, no stamp duty will be due (but they may be liable for inheritance tax.)
Always ensure you speak to your solicitor to find out exactly how much stamp duty will be due.
If you would like help with buying your first property contact Astra for further advice