Stamp Duty Land Tax is a tax levied on the transfer of property in the United Kingdom and is usually paid by the purchaser. The collection of stamp duty is administered by H.M. Revenue and Customs. Stamp Duty Land Tax is calculated as a percentage of the value of the property that is transferred.
Calculation of Stamp Duty Land Tax
As of 2011, stamp duty is not payable on the purchase of properties up to £125,000. For properties between £125,000 and £250,000, the duty is 1 percent of the price and for properties valued between £250,000 and £500,000, the stamp duty is 3 percent of the price. On the purchase of properties, stamp duty land tax is valued at greater than £500,000 at 4 percent. If the value of the property is over £1,000,000, the stamp duty is charged at 5 percent of the purchase price. The tax is levied according to the whole value of the property, so it is a good idea to negotiate a purchase price below one of the thresholds to reduce stamp duty.
First time buyers
To encourage house-buying, the government extended the threshold for first time buyers purchasing property between March 2010 and March 2012. If you are buying a property for the first time, you pay UK stamp duty only if the property is valued at more than £250,000.
Disadvantaged areas relief
The government has designated certain areas as “disadvantaged” and if you’re buying a property in one of these areas, you may be able to claim Disadvantaged Areas Relief from Stamp Duty Land Tax.
For residential properties in a disadvantaged area, stamp duty is not charged if the property costs less than £150,000. If the property is valued at between £150,000 and £250,000, the stamp duty is 1 percent.
Disadvantaged Areas Relief does not apply to properties over £250,000.
H.M. Revenue and Customs can advise you whether the property you wish to purchase is indeed found in a disadvantaged area.
Exemptions from Stamp Duty
Certain property transactions are exempt from Stamp Duty Land Tax. These include the transfer of property by means of a will or in the event of a divorce. In addition, if no money is paid for the transfer, for example, if you gift a property to your son or daughter, then you do not have to pay Stamp Duty Land Tax.