The stamp duty that we recognize today was first introduced in 2003 and is a necessary tax that we have to pay when we purchase a property or land that exceeds the threshold of £125,000 for residential properties and £150,000 for non-residential land and properties.
Why do we pay Stamp Duty?
When the ownership of a land changes from the previous owner to the next, it must be legally and officially registered.
This requires a Certificate of Land Ownership from the HMRC, and the only way to get that is on receipt of the stamp duty payment.
The Stamp Duty Land Tax Thresholds today are formed as follows:
- No tax on the first £125,000 paid
- 2% on the portion up to £250,000
- 5% on the portion up to £925,000
- 10% on the portion up to £1.5 million
- 12% on everything over that
The following example shows how the Stamp Duty is calculated.
If you buy a house for £275,000, the SDLT you owe is calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £25,000 = £1,250
Total SDLT = £3,750
There are a few things you can do in order to prepare yourself for a Stamp Duty payment.
Subtract the value of certain items from the total price of the property. Items like carpets, curtains, light fittings and other similar things can all be subtracted from the total house price.
Use a stamp duty calculator as it can be very helpful when it comes to working out your tax threshold
Choose your area, considering that some boroughs, offer some stamp duty discount and rebates.
Choose a new build, if you choose certain new build properties, sometimes that particular housing company will pay for your stamp duty as part of the package. Or you may be eligible for a tax break if your home is registered as zero-carbon.