Stamp Duty
Stamp Duty, now known as Stamp Duty Land Tax or SDLT, is a tax on land and property transactions in England and Northern Ireland. Wales has a similar tax, called Land Transaction Tax. It is paid by the buyer. The name comes from the way in which the tax used to be paid. Originally, conveyancers sent completed documents and payment of the tax to the tax office, which would show that payment had been made by fixing a stamp to the document.
The tax rate differs according to the value of the property and whether it is purely residential or mixed residential and commercial use. In England, if the value paid for the property is less than £125,000, there is currently no Stamp Duty to be paid. If a property is worth over £125,000, the Stamp Duty rate starts at 2% of the value over £125,000, increasing in stages for higher-valued properties. The rates and thresholds differ slightly in Wales. Buyers should bear in mind that the rates may be changed by the Government in the budget.
Stamp Duty relief for first-time buyers
Buyers purchasing their first home do not currently pay Stamp Duty unless the property costs over £300,000. There are strict rules over who qualifies as a first-time buyer for these purposes. You must never have owned a home before, inherited a home, or owned a home abroad. It is important to understand that even if you currently rent, having sold a home in the past, you will not qualify as a first-time buyer.
Stamp Duty on second homes
There are different rules for Stamp Duty if you or your partner already own a home or a share in a home. If the property you are buying falls under the ‘second home’ rules, Stamp Duty becomes payable on all purchases over £40,000 rather than the usual £125,000 threshold. Buyers of second homes need to budget for an additional 3% Stamp Duty on top of the amount which would be payable on the purchase if the property was their only home.
How to pay Stamp Duty
All property buyers need to complete the Government’s ‘SDLT form‘ and submit it online to HMRC within 14 days of completion of a property purchase whether or not there is tax to pay. You can do this yourself but in practice, your conveyancer will prepare a draft SDLT return, ask you to check and sign it and then submit it for you after they have completed your purchase.
What if I don’t pay Stamp Duty?
There are penalties for late filing and your conveyancer will need the submission receipt for the SDLT form to submit your application for registration of your home to the Land Registry. For these two reasons, your conveyancer will ask you for all the information needed to complete the SDLT form before they complete your purchase. Make sure that you provide all the information they have asked for promptly, to avoid any delays.
Your conveyancer will ask for the funds to pay your Stamp Duty before they complete your property purchase. Again, make sure you get the money to your conveyancer in plenty of time. Want to learn more about the fees involved in conveyancing? This conveyancing fees guide is a great place to start.
Who can help?
Property website OneDome is the UK’s first website capable of connecting each and every step of home buying and selling. Their conveyancing platform makes arranging the essential aspects of conveyancing much easier than traditional methods.
The platform features the ability to send sensitive documents online, encrypted for security and peace of mind and avoiding the delays which can be caused by reliance on the postal system. You can easily communicate with your conveyancer too, helping you to resolve any queries quickly and easily. The best part? You can track the progress of the conveyancing in real time, making the whole process far easier to manage for everyone involved.
For more on what else OneDome can help with, take a look at their explainer video.