Buying a house is expensive, but the costs don’t end with the sale price. They represent the vast portion of your outgoings, certainly, but there are many extra fees that your conveyancer or conveyancing solicitor should have made you aware of in your conveyancing quote. It is likely that the biggest of these extras will be Stamp Duty Land Tax, or, as it is more likely to be referred to, Stamp Duty.
So what is Stamp Duty Land Tax?
Stamp Duty is a tax payable on most properties in the UK, as a buyer it's your responsibility to pay so make sure you and your conveyancer factor it into your budget
Stamp Duty Land Tax replaced the old Stamp Duty on the purchase of property in 2003. It is a tax levied by the government on property purchases, and needs to be paid by the purchaser.
How much you pay depends on how much your property is worth. The tax is banded, meaning you pay a certain percentage of the property’s sale price. It’s not like Income Tax, where you pay differing amounts on the various layers of your income; you pay a single rate on the entire amount you spent on your new home.
What are the Stamp Duty Land Tax bands?
At the time of writing, the table below was accurate. It made headline news when Chancellor George Osborne shook up the Stamp Duty regime with a much higher rate for mansions and removing previous assistance to first time buyers, who had not needed to pay anything on properties worth up to £250,000.
Property Value (tax rate)
£0-125k (0%)
£125,001-250k (1%)
£250,001-500k (3%)
£500,001-1m (4%)
£1,000,001-2million (5%)
£2,000,001 and above (7%)
Is there any way out of Stamp Duty?
Unfortunately, there is not a huge amount you can do. Previously, people would agree an asking price at, say £249,999 and then pay an inflated sum for fixtures and fittings, increasing the sale price in real terms while avoiding a tripling of the Stamp Duty liability, but the Inland Revenue keeps its eyes peeled for such tricks.
There is an exemption for people buying homes in areas the government recognises as disadvantaged. Disadvantaged Area Relief extends the 0% bracket to £150k. You can see if the area you are buying in counts as disadvantaged here.
There are other ways that property developers or local authorities can avoid or reduce their Stamp Duty bill listed here, but no such luck for everyday property buyers.
Obviously the simplest way to avoid Stamp Duty is buy a property beneath the tax threshold, but with family homes in much of the country starting around a quarter of a million pounds, it is an inevitable part of buying a house these days, and you should make sure you budget for it when you are working out whether you can afford a house.
