Complete guide to stamp duty
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Stamp Duty explained
Stamp Duty is the tax payable to the government for changing the documents that specify who owns a particular property.
Stamp duty was first introduced in the UK in 1694; and continues to this day through a series of stamp acts.
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Stamp Duty Land Tax
The "Stamp duty land tax" (SDLT) was introduced by the Finance Act 2003. It largely replaced stamp duty with effect from 1 December 2003. SDLT is a form of self-assessed transfer tax charged on "land transactions".
For typical transactions in land, such as the buying and selling of a residential house, there is little change from stamp duty, except that a tax return is required to be made to the HM Revenue & Customs (previously Inland Revenue) and documents no longer need to be given a physical stamp. Like any other self-assessed tax, but unlike stamp duty, HM Revenue & Customs is able to enquire into an SDLT return and raise assessments to recover unpaid SDLT.
Whether or not tax is payable Her Majesty's Revenue and Customs require a Return to be received by them within four weeks of the transaction completion. Failing which, they have power to levy a fine on the tax payer - the fine is not for failure to pay the tax but for failure to make the return.
When a return is accepted by HMRC they provide a Certificate without which it is impossible to register a change in the land ownership.
Stamp Duty for residential land purchases
The amount of stamp duty for residential land purchases depends on several key factors: e.g. New build home, economic area and lastly the value of the property. It works on a percentage basis where the percentage payable applies to the whole of the purchase price.
For example, a house priced at £250,000 would attract an SDLT of £2,500, but one of £250,001 would be liable to SDLT of £7,500.
One result of this banding is that it has a distorting effect on the market, because a house is very difficult to sell at prices just above each threshold, for example, £255,000.
Today, there is no stamp duty payable on properties up to £125,000. It is charged at 1% on houses costing between £125,000 and £250,000, 3% on those worth from £250,000 to £500,000, 4% for those sold for more than £500,000 to £999,999.
From April 2011, properties being sold for over £1,000,000 incurred an increased SDLT to 5% and from 24th March 2012, properties over £2,000,000 will incur SDLT of 7%. In London, the average asking price for a home is £402,000, which would mean stamp duty of more than £12,000.
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Stamp Duty calculator
Here is a link to MoneySavingExpert's simple Stamp Duty Calculator
| Consideration |
Rate |
| Up to £125,000 |
0% |
| £125,000 to £250,000 |
1% |
| £250,000 to £500,000 |
3% |
| £500,000 to £999,999 |
4% |
| £1,000,000 to £1,999,999 |
5% |
| £2,000,000+ |
7% |
Related links
Free guide to property conveyancing
Guide to conveyancing solicitors in England and Wales
Guide to conveyancing solicitors in Scotland
Conveyancing in London
Last updated: 23rd March 2012