By Harry Palmer
Purchasing a property comes with a host of additional charges attached, and in reality the final cost of purchasing a home is far beyond the price your paying for the house initially. For anyone going into their first time buying a property, it’s paramount that you take into account these additional costs beforehand, so as to not end up underprepared for the final expense of buying your property.
Stamp Duty Land tax (SDLT) is one of these charges, and is a tax that must be paid when a property over a certain price point is purchased. Stamp duty has to be paid on properties worth over £250,000, but there is relief offered to first time buyers, who won’t have to pay the tax on lower value properties, and be offered to pay a discounted rate on higher value properties.
We’ve put together a guide on what to know about Stamp Duty tax, to make sure you don’t get hit with any unexpected additional expenses when you’re purchasing your home.
Stamp Duty bands
Stamp duty is calculated based on the worth of your property, with separate bands calculating how much to pay depending on the price of the property.
Stamp duty calculators can be found online to help you quickly figure out which band you fall into and how much you’ll have to pay on your property.
First time buyers
For those purchasing their first property, you’ll be offered relief towards your stamp duty tax, which means you’ll pay no stamp duty tax on you’re first property if it’s under £425,000.
It’s important to note this only applies to those who have strictly never before owned a residential property, for example if you’ve previously inherited a property, even if you never lived in it and sold it, you wouldn’t benefit from the first time buyers relief.
Up to £625,000, you’ll be exempt from SDLT on the first £425,000, and pay the standard rate of 5% tax on the remaining amount up to £2,000. If the property is over £625,000 however, you won’t qualify for first time buyers’ relief even if you’re purchasing your first property, and will have to pay the standard SDLT rate.
Stamp Duty and Shared Ownership
Whilst Stamp Duty is fairly straightforward, things get more complicated when you’re not purchasing your home outright, such as buying shares of a property through shared ownership. If you’re intending on staircasing your shared ownership property, you can pay your SDLT upfront on the entire value of the property, and whilst this is a higher cost upfront it also means you don’t have to worry about SDLT in the future and can focus on getting funds together to purchase your property outright.
This can be an especially attractive option for first time buyers, who with the discounted rate may be paying low SDLT or in some cases none at all.
However, this also works the other way, and for those on a tighter budget who are looking to avoid paying a large sum and spread there SDLT over time, you can calculate the worth of your share and pay SDLT on only that amount. This can be a useful move for someone buying their first home, in order to bring the tax band below the requirement to pay SDLT at all.
Situations like these are where simple processes like SLDT can become more complicated, and it’s always a good idea to get in contact with a solicitor or tax advisor for professional guidance on how to tackled your tax, especially for those purchasing their first homes who may find the process confusing or overwhelming.
SDLT has to be paid within 14 days of completing your purchase of a property, and as is often the case it’s important to take your circumstances into account and do thorough research online, for example non-UK residents may have to pay additional charges when purchasing a property.