What is Stamp Duty? A Handy Guide

Are you planning a house move? Congratulations! These are exciting – if challenging – times. There’s a reason they say moving house is one of the most stressful things most of us will do in our lifetime.

There is so much to think about before you sign on the dotted line that the process of buying a property can seem utterly overwhelming.

If you’ve wondered what Stamp Duty is, though, we’re about to help you out, thanks to this handy guide from the Unity Mutual team. Read on to discover all you need to know…

What is Stamp Duty?

When considering the costs involved in buying a new home, you’ll probably be aware that there is so much more to think about than the price of the house itself.

From legal fees to estate agent rates, you may have to put aside hundreds, if not thousands. That’s not to mention any costs in relation to house repairs on your own home; unless you’re in an extremely healthy financial position, you’ll probably need to sell it before you buy your next property.

So, what is Stamp Duty – and should you be worried about it eating up your house-moving budget?

Whether you’re already on the property ladder or you’re a first-time buyer, you’ll need to know about Stamp Duty, which is a tax you might have to pay when you purchase a new home.

Be aware, though, that not everyone will have to pay Stamp Duty. If, for example, you’re buying a residential property in England or Northern Ireland, you’ll only pay Stamp Duty if the price of the home exceeds £250,000.

If you’re buying your first property in England and Northern Ireland and you’re wondering ‘what is the Stamp Duty threshold’, you may be pleased to learn that you won’t have to pay Stamp Duty on the first £425,000 of its purchase price. You’ll pay 5% for any amount above £425,000 and up to £625,000.

Is the house you’re purchasing worth over £625,000? If so, you’ll pay Stamp Duty at the home mover rate.

Basically, how much you pay depends on two factors:

  • If the house will be used as a residential property or as a non-residential or mixed-use property
  • Whether you are eligible for relief or an exemption – find out more.

Details on Stamp Duty thresholds (and more) can be found on the Gov.uk website.

Do you live in Wales or Scotland?

When it comes to fees for those living in Wales, Land Transaction Tax (LTT) will be due on homes costing above £225,000, while for people in Scotland, Land and Buildings Transaction Tax (LBTT) will mean you’ll have to put money aside for homes that cost £145,000.

If you’re a first-time buyer, the threshold is £175,000.

What if I want to buy a second home; what do I pay then?

Those who are buying a second property in England and Northern Island will pay an extra 3% Stamp Duty – if the home is worth more than £40,000 (which in most cases, it will be). Additional rates apply in Scotland and Wales, and the 3% Stamp Duty fee also applies to Buy to Let properties and holiday homes.

What if I don’t sell my current home before getting the keys to my new property?

For people who are yet to find a buyer for their existing property before receiving the keys to a new home, a higher tax rate may apply. If that’s the case, though, you can apply for a refund once your home has been sold - just head to the Government website to find out more.

How soon do I need to pay Stamp Duty?

You don’t need to pay Stamp Duty before you move into your property – although many people think that is the case. Instead, you will have two weeks to pay it, after the point of receiving the keys to your new home.

Who processes your Stamp Duty payment?

Payments are made to HMRC, with your solicitor handling the process on your behalf.

Want to ensure your finances are as healthy as possible ahead of a prospective house move? Saving for the many costs involved when buying a house can be a challenge; from your deposit to all the ‘hidden’ fees like Stamp Duty and house surveys, there’s much that can catch first-time buyers off guard.

Be prepared by building up a generous savings pot in advance of your property search; take a look at our range of financial products or get in touch if you have a question for the Unity Mutual team. We’re looking forward to hearing from you.

Until next time…

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