Personal Finance and Online Security

What is Stamp Duty Tax?

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When you buy a property or land in England or Northern Ireland, you will sometimes need to pay Stamp Duty Land Tax (SDLT). If you are purchasing in Wales or Scotland, you will either pay Land Transaction Tax (LTT) or Buildings Transaction Tax (LBTT), respectively. Essentially, they are all the same thing!

In 2014, all home nations moved to a progressive stamp duty rate system. What this means is that instead of paying a single tax rate on the entire property, depending on the price of the property, you may pay one rate for some of the property value, and another rate for the rest. 

In response to the coronavirus pandemic, the threshold at which you begin to pay stamp duty was temporarily increased. The chancellor has extended this stamp duty holiday until the end of June in England, Northern Ireland, and Wales. This means you may not need to pay any tax or as much as you would have in the past.

Stamp Duty Land Tax Rates – Pre 1 July 2021

I will present the stamp duty tax rates in England and Northern Ireland below. 

These are valid until 1 July 2021.

Property Value                        Stamp Duty Tax Rate

Up to £500,000                                             0%

£500,001 – £925,000                                  5%

£925,001 – £1.5m                                         10%

Above £1.5m                                                   15%

Examples

  1. Buying a property for £475,000?

You will pay nothing below £500,000. Therefore, you pay no stamp duty tax.

  1. Buying a property valued at £725,000?

As you pay nothing below £500,000, you only need to pay tax on the remaining £225,000. Therefore, you will need to pay 5% of £225,000 = £11,500.

Stamp Duty Land Tax Rates – Post 1 July 2021

As mentioned, the threshold at which you start paying was increased due to the coronavirus pandemic. From 1 July 2021, the threshold is decreasing to £250,000. 

Therefore, the new rates will be:

Property Value                      Stamp Duty Tax Rate

Up to £250,000                                           0%

£250,001 – £925,000                                5%

£925,001 – £1.5m                                       10%

Above £1.5m                                                 12%

The MoneySavingExpert has lots of great content, including this Stamp Duty Calculator.

When do you pay stamp duty?

You have 14 days from the date of your property transaction (signed contract and handed the keys) to file your Stamp Duty Land Tax return and pay the amount. Your solicitor will most likely sort this payment, however, it is your responsibility to ensure your stamp duty tax is paid.

You can add stamp duty to your mortgage, however, this generally means a bigger mortgage debt, which is not generally recommended.

-PocketPound

Featured image: Scott Webb on unsplash

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