The government has reformed stamp duty and if you are buying a property then you’ll be keen to know the answers to these questions about how the new stamp duty works.
The new stamp duty rules start on December 4, 2014.
If you are buying a home for £937,500 or less you will pay less stamp duty than you would have before the change in rules or the same. The government says that means 98% of people will save money under the new rules.
The government has said that for the average London home which they are saying costs £510,000 you would have paid £20,400 under the old stamp duty rules whereas under the new rules you’ll pay £15,500 at a saving of £4,900.
Basically under the old rules you would pay a single percentage rate on the TOTAL purchase price of the property. Under the new rules you only pay the rate of tax on part of the property price within each tax band. So much like income tax, everyone gets an allotted tax-free portion of the property amounting to £125,000.
Under the old rules
You bought a property for £185,000 – Tax rate of 1% on full purchase price – Total = £1,850
Under the new rules:
You buy a property for £185,000 – you pay NOTHING on the first £125,000 – You pay tax on the remaining £60,000 using the total purchase price to find the rate – Total = £1,200
That means in this example you would save £650 under the new rules.
What are the rates of tax in each tax band?
How does the new stamp duty work? As of December 4, 2014 stamp duty is changing
HMRC has an online calculator to help you figure out how much stamp duty you will have to pay. Click the link to find the online stamp duty calculator.
That depends. And to some degree, it’s even your choice.
If you exchange and complete your purchase on or after December 4, 2014 you will pay stamp duty under the new rules.
If you completed on the purchase of your property on or before December 3, 2014, but have yet to fill out your stamp duty return, you still have to pay stamp duty under the new rules.
If you exchanged contracts on your purchase before December 4, 2014 but complete on or after December 4, 2014 you have a choice as to whether you which to pay under the old rules or the new. For the majority of people, paying under the new rules will save you money. It’s best to use the online stamp duty calculator to check how much you would have to pay under the new rules: online stamp duty calculator.
Your conveyancing solicitor will work out the stamp duty you have to pay and arrange its payment for you.
The way the stamp duty is actually paid has not changed. Your conveyancing solicitor will fill out a stamp duty return for you and pay what you owe within 30 days of completing on the purchase of your property.
Yes, unless the property cost less than £40,000.
No, the changes do not affect the purchase of commercial properties.
If you have any more questions about how the new stamp duty rules might affect your current purchase or a purchase you plan to make in the near future, call us on 020 8799 3371 and we’d be happy to answer any questions you may have.
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