When buying a property, one of the terms that often causes confusion is Stamp Duty. Despite this, it is actually one of the easiest to explain. Put simply, Stamp Duty is a tax that you must pay when purchasing a property or a piece of land in England or Northern Ireland.
Under normal circumstances, buyers pay stamp duty on all homes worth more than £125,000 but the government has temporarily raised the threshold in an effort to stimulate the housing market during the COVID-19 pandemic. Until the end of March 2021, Stamp Duty only applies to properties worth more than £500,000, making this a great time to buy a house.
How Much is Stamp Duty?
Until the 31st March 2021, the Stamp Duty rates are as follows:
Properties worth less than £500,000 - 0%
Properties worth £500,001 to £925,000 - 8%
Properties worth £925,001 to £1.5million - 10%
Properties worth over £1.5 million - 12%
It is worth noting that you only pay Stamp Duty on the portion of the property worth more than the threshold. For example, if a property is worth £600,000, you do not have to pay 8% of its total value. The property is worth £100,000 more than the threshold, so your Stamp Duty would be 8% of £100,000 (£8,000).
How Much is Stamp Duty for a Second Home?
The Stamp Duty on second homes and some buy to let properties is an extra 3%. This applies to all properties worth more than £40,000, even under the temporary rates. This means that, until 31st March 2021, second homes worth between £40,000 and £500,000 will incur a Stamp Duty of 3%, and then 3% must be added to each of the bands for properties worth over £500,000. For example, a second home costing £600,000 would carry a Stamp Duty of 8% + 3% for a total of 11%.
Ask the Experts
Buying a house is never easy, and things are even trickier than usual at the moment. From Stamp Duty to conveyancing issues, there is a lot to think about at once. If it all starts to feel a bit overwhelming, don’t hesitate to give us a call. Our friendly, experienced team can help with all aspects of legal work surrounding house buying, making the whole process as painless as possible. Give us a call today to get started.
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