If you are thinking about buying a property, you will first need
to save a sizeable pot of cash to pay off the Chancellor. Stamp duty,
for most people, is an unavoidable cost of moving; for the The
Treasury, however, it is a nice little earner. Profits from stamp
duty land tax, to give it its proper name, are set to rise by a
third to £14.3 billion in 2007-8, leaving home movers £3.4 billion
worse off than the previous year.
But what does it mean for you and how much does it cost? Here are
ten stamp duty facts that every house buyer should know:
1/ 'Stamp duty land tax' must be paid by buyers on all
transactions over £125,000. If the property's value is less than
this, then you will be in the lucky minority which doesn't have to
pay anything to the Chancellor.
2/ There are three different levels of stamp duty depending on
the value of the house purchase - these are applied as flat rates:
buyers of homes priced between £125,001 and £250,000 will have to
pay 1% of the property's value in stamp duty. Homes costing between
£250,001 and £500,000 attract a stamp duty rate of 3%; for homes
costing in excess of £500,001 the tax is 4% of the value of the
property.
3/ According to the Halifax, 19% of homes in England and Wales
are valued above £250,000. Three per cent of properties fall into
the 4% stamp duty band.
4/ If you are buying a property an area designated by the
government as 'disadvantaged', you don't pay any stamp duty if the
purchase price is £150,000 or less. To find out more on which areas
qualify as disadvantaged,
click
here .
5/ In his last Budget as Chancellor, Gordon Brown kept the nil-rate
threshold for stamp duty unchanged at £125,000, despite speculation
that it would rise to £150,000.
6/ Increases in property prices means that fewer house purchases
fall into the nil-rate stamp duty band. Two thirds of first-time
buyers with mortgages must currently pay stamp duty.
7/ Had the stamp duty threshold risen at the same rate as house-price
inflation since 1993, it would now stand at £206,000, according to
Nationwide. The average cost of a home is £175,554 - an increase of
9.5% on last year.
8/ In the 2007 Budget it was announced that carbon-neutral homes
under £500,000 would be made free of stamp duty until 2012. For
properties valued above £500,000 a £9,000 stamp duty discount is
applied. However, some industry experts say that these tax breaks
will benefit few: according to Smartnewhomes.com, there are only 27
carbon-neutral homes in the UK.
9/ With the highest average property prices in the UK, London
buyers hardest by stamp duty bills. Buyers in the capital pay on
average £8,615 in stamp duty, compared with £1,795 five years ago.
Property values in London now average just over £280,000 according
to Nationwide.
10/ As the buyer of the property, you are responsible for
completing the land transaction return and paying stamp duty, but,
in practice, your solicitor will usually handle this for you and
send it to the Inland Revenue on your behalf.
