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Everything You Need To Know About Stamp Duty

22 Jan 2021

What is stamp duty?

Stamp Duty Land Tax (SDLT) is a tax you will probably have to pay if you buy a residential property or a piece of land in England and Northern Ireland. This tax applies to both freehold and leasehold properties – whether you’re a cash buyer, or you are buying with a mortgage.

Who has to pay stamp duty?

The majority of buyers need to pay stamp duty if the property is above the usual threshold of £40,001. You should always factor stamp duty into your calculations.

First-time buyers are exempt up to the first £300,000 (although they are exempt up to £500,000 until the end of the stamp duty holiday on 31/03/21).

How much is stamp duty?

If you’re buying your main (and only) property up until 31 March 2021, you will not have to pay Stamp Duty on properties costing up to £500,000. This will apply whether you’re a first-time buyer or have previously owned a property.
Charges apply to any amount above the £500,000 mark. For example, if you buy a house for £550,000, the SDLT you owe is calculated as follows:

• 0% on the first £500,000 = £0
• 5% on the final £50,000 = £2,500

What are stamp duty costs before and after 31/03/21?

stamp_duty_rates_breakdown

When does the stamp duty holiday end?

The stamp duty holiday ends on 31/03/21, however, there is a process to follow when buying a house and due to the significant amount of people wanting to take advantage of the ‘holiday’, this process is taking much longer. If you wish to reserve a home with Stonebridge, we are advising that this must be done before 31/01/21.

Will the stamp duty holiday be extended?

No-one knows the answer to this. An online petition to extend the holiday has passed the 100,000 thresholds (117,000 signatures) which would normally trigger such a discussion.

The House of Commons previously confirmed there would be a debate about stamp duty, however, Jacob Rees-Mogg, leader of the House of Commons, has temporarily suspended debates in Westminster Hall, meaning that the stamp duty holiday extension may now not be debated in parliament.

Do you pay stamp duty on a second home?

Yes, stamp duty is payable on a second home. Until 31/03/21, you will still pay Stamp Duty on a property costing more than £40,001 at the revised rates. After this date, the percentage payable will increase (please see illustration above).

I haven’t sold my main home yet; do I still pay stamp duty?

If you are buying a new main property, but the sale of your other main property is delayed, there could be a period of time where you own two properties. If this is the case, then you would be expected to pay the surcharge. However, if you then sell or give away your previous main home within three years of buying your new home, you can apply for a refund of the second home surcharge on your stamp duty bill.

Can I add stamp duty to my mortgage?

Yes, you can add this tax to your mortgage, but bear in mind that this will add to your long-term interest and debt, and is dependant on the loan to value of your mortgage.

How do I pay stamp duty?

Your solicitor will normally deal with the Stamp Duty payments, although you can do it yourself. However, it is the home buyer’s responsibility to make sure it’s all submitted on time.

You have 14 days after your move-in date to pay any SDLT due and this payment must be made in one payment. If you don’t submit a return and pay the tax within 14 days, HMRC might charge you penalties and interest.

If you have any questions about stamp duty, please ask one of our friendly and knowledgeable sales advisers. You’ll find their contact details on development pages.

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