PUTTING YOUR STAMP ON A NEW HOME

With Alex Neill of Which?

Star Courier (Surrey & Hants) - - FRONT PAGE -

Stamp duty is, for most peo­ple, a tax you pay on buy­ing a prop­erty - ei­ther out­right or with a mort­gage. But it can ap­ply to other as­sets - nowa­days largely shares on the stock mar­ket. The phrase comes from the of­fi­cial gov­ern­ment stamp that went onto doc­u­ments trans­fer­ring an item of value – prop­erty, some in­vest­ments, and un­til the 1960s, on every cheque writ­ten.

To avoid con­fu­sion, the tax you pay when you buy a home or other prop­erty has been of­fi­cially called Stamp Duty Land Tax since 2003, un­less you are in Scot­land it is called Land and Build­ings Trans­ac­tion Tax.

But de­spite the name change, it’s still gen­er­ally called stamp duty. It can add a sub­stan­tial slice to the pur­chase price – even more for a se­cond home or one to let out.

There are no le­gal ways of re­duc­ing or avoid­ing it – it is added onto the price that you, or your lender, hands over dur­ing the trans­fer process, gen­er­ally by a solic­i­tor or le­gal con­veyanc­ing spe­cial­ist although you can do it your­self.

You can add it onto your loan. But this can be a bad idea - the higher the loan to the value of the prop­erty, the higher the in­ter­est rate. You will also pay it off over 25 years, in­cur­ring ex­tra in­ter­est changes.

Un­til 2014, stamp duty was a “slab tax” – the rate on your pur­chase price ap­plied to the whole amount. This led to the duty on a £ 250,001 prop­erty be­ing three times that on a £ 249,999 home. Some cheated with cash or pay­ing silly amounts for fur­ni­ture to get the value below the thresh­old.

Now it’s like in­come tax – the first slice ( up to £ 125,000) is zero, the next £ 125,001 to £ 250,000) is 2%, and the amount from £ 250,001 to £ 925,000 is 5%.

There are two higher rates for the prici­est prop­er­ties. In Scot­land, the rates are sim­i­lar to the rest of the UK on homes up to £ 325,000 but more ex­pen­sive af­ter that.

The change re­duced stamp duty for most – a £ 300,000 home went down from £ 9,000 to £ 5,000.

There’s a stamp duty cal­cu­la­tor on the Which? Mort­gage Ad­vis­ers web­site. With up to five tax lev­els, most of us could do with a lit­tle help!

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