When buying a home, there are many additional costs to consider such as removal costs and any surveys you may need. One such cost is that of Stamp Duty Land Tax, a tax which is payable on certain conveyancing transactions.
If you are purchasing a property at a price of over £125,000 this purchase would most likely be subject to Stamp Duty Land Tax which would need to be paid to the Government on completion of your purchase by your solicitor on your behalf.
There are several thresholds for Stamp Duty Land Tax with different amounts of tax payable on a residential conveyancing transaction at each level. A purchase of a property at a value of between £125,000 and £250,000 is subject to Stamp Duty Land Tax at a rate of 1% of the purchase price. Purchases from £250,000 and £500,000 are subject to a rate of 3% and anything over £500,000 is subject to a rate of 4% of the purchase price.
For example, this would mean if you were buying a property at a purchase price of £180,000 you would pay Stamp Duty Land Tax in the amount of £1,800 when you completed your purchase.
On March 24th 2010 the Government announced changes to payment of Stamp Duty Land Tax in their Budget in a bid to assist the housing market and promote a further increase in residential conveyancing transactions.
The Government introduced relief from Stamp Duty Land Tax for residential conveyancing transactions up to a value of £250,000 where a purchaser or all purchasers are first time buyers and will be using the property as their main or only residence.
This is not a permanent measure but is applicable to all conveyancing transactions which complete between 25th March 2010 and 25th March 2012. It is also only applicable to first time buyers. If you have owned a property at any time anywhere in the world, unfortunately you will not benefit from the incentive. This also applies if you are buying with another individual or partner who has owned a property anywhere in the world. Stamp Duty Land Tax would then be payable if you were purchasing a property at a price in excess of £125,000.
However it’s not all doom and gloom if this is not your first house purchase and you are trying to keep your conveyencing fees to a minimum. The Government still waives Stamp Duty Land Tax in certain areas which are referred to as Disadvantaged Areas. If you are purchasing a property in such an area at a price of under £150,000 you may not have to pay Stamp Duty Land Tax. Always be sure to check with your solicitor as to whether Stamp Duty Land Tax will be payable for the property you are purchasing.
The Government is also set to change the level of Stamp Duty Land Tax payable on residential conveyancing transactions of properties where the purchase price exceeds £500,000. From 6th April 2011 a new higher rate will apply where the purchase price exceeds £1 million. Anyone purchasing such a property will be faced with Stamp Duty Land Tax at a rate of 5%.
The housing market has begun to improve and it is hoped that this measure will attract more first time buyers on to the property ladder.
