If you bought your first property after 22 November 2017 or are looking to get one in London, there’s good news for you in terms of stamp duty relief.
All about stamp duty
When you purchase a piece of land or residential property in England or Northern Ireland, you are required to pay stamp duty. The stamp duty must be paid when the property is valued above £125,000 for a first home and £40,000 in case of a second home.
Stamp duty tax is applicable to leasehold as well as freehold properties and holds whether the property is an outright purchase or mortgage-based.
In case you purchase a property in Scotland, the LBTT or Land and Buildings Transaction Tax is applicable, while in Wales, the LTT or Land Transaction Tax (LTT) is enforced in place of stamp duty.
How much stamp duty has to be paid?
Your estate agent London can guide you on several rate bands on stamp duty, which is calculated based on the property purchase price that falls within each band.
For instance, if you purchase a property for £300,000, the SDLT or Stamp Duty Land Tax you need to pay is calculated as below:
0% for the first £125,000 which is £0
2% applies for the next £125,000 which is £2,500
5% on the final £50,000 = £2,500
The total stamp duty to be paid is in this case £5,000
The different rate bands and the applicable stamp duty is as follows:
|Min price||Max price||Stamp duty|
|£925,001||£1.5 million||10 percent|
|Above £1.5 million||12 percent|
Stamp duty for second homes
Those who buy additional residential properties, including buy-to-let property or second homes, need to pay 3 percent extra in stamp duty over and above the fees as per the rate band.
The additional charge is applicable to properties that cost £40,000 and above. The extra stamp duty does not apply to mobile homes, houseboats, and caravans.
The homeowner has to pay higher rates when a new main residence is purchased but the selling the previous dwelling is delayed. If the previous main home is sold within three years of purchasing the new main residence, the homeowner can claim a refund of the extra SDLT rate.
The refund can be requested in case:
• the previous main residence is sold within three years
• the refund is claimed within three months of the sale of the previous main residence or in a timeframe of 12 months from filing SDLT tax return
What stamp duty relief do first time home buyers get?
The stamp duty relief was introduced at Budget 2017 for first time home buyers. The relief is applicable from 22 November 2017 for residential property purchases costing £500,000 or less when the property is intended to be the main residence.
If you are buying a home for the first time in Northern Ireland or England, you do not need to pay any stamp duty if your home costs £300,000 or lower. This means you can save as much as £5,000 if you are a first-time home buyer.
If the property costs below or equal to £500,000, there is no stamp duty for the first £300,000, and the tax has to be paid for the remaining £200,000. For instance, if you buy a property that is worth £450,000, you have to pay tax only on £150,000.
In the event the purchased property has a value of over £500,000, the standard stamp duty rates are applicable, and the home buyer does not qualify for relief as a first time home buyer.
If you bought a home on or after November 22, 2017, under the scheme of Shared Ownership, you can claim Stamp Duty relief if your property amounts to £500,000. This relief is applicable with effect from October 2018.
If you were not eligible for this relief and have paid the tax in stages, you can claim a tax refund by completing SDLT return.
Stamp duty relief for joint ownership
If you are buying a property jointly with your spouse, both owners need to be first-time buyers to qualify for Stamp Duty relief.
Unmarried couples can qualify for stamp duty reduction if the person mentioned in the mortgage deed is a first time buyer. However, irrespective of the number of names the deed contains, the maximum saving is only £5,000.
When should you pay Stamp Duty?
The SDLT has to be filed and the dues paid in a period of 14 days from the transaction date or the completion of purchase. As of March 1, 2019 the time-frame has been reduced to 14 days from 30 days.
Consulting your estate agent London is a great way to know more about stamp duty relief, eligibility for refund, and joint ownership.
If you are looking to rent or purchase a home in the city, speak to our estate agent London today. We can help you find a home in the heart of London. Contact our Soho office on 020 7734 4062, fill in the form below or pop in to our office on Broadwick Street and we can point you in the right direction.