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Stamp Duty- How much will we have to pay?

Stamp Duty-how much will we have to pay?
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Don’t forget to budget for Stamp Duty

Buying a house is expensive, not only are house prices considerably higher than in previous years but the added fee’s in order to make the purchase can soon add up. One such fee that many people forget to take into consideration is stamp duty, or land tax as it is sometimes referred to as.

What is Stamp Duty?

Stamp duty is a tax that you have to pay depending on the value of the property you are purchasing. At present the lowest threshold for paying stamp duty is £125,000, but where other taxes are only applied to the amount above the threshold, stamp duty is paid on the whole amount. An example of that would be if you bought a house for £125,001, you would pay stamp duty on the full amount, where as if you had only paid £125,000, you would have paid no stamp duty whatsoever, which is why buyers try to keep prices beneath the various tax brackets.

What are the current Stamp Duty Rates?

The stamp duty rates are set across the whole of the UK and don’t differ or fluctuate in any way. At present, the percentage of stamp duty paid is based on the following property values:

  • £125,000 or below = 0%
  • £125,001 – £250,000 = 1%
  • £250,001 – £500,000 = 3%
  • £500,001 – £1,000,000 = 4%
  • £1,000,001 – £2,000,000 = 5%
  • £2,000,001 upwards = 7%

If you are buying a property between these values, you have to pay stamp duty, there are no exceptions! It should be paid on completion but you do have up to 30 days afterwards to pay it. Any later and you may face a fine and additional interest charges, but your solicitor should handle this side of things and ensure you are fully paid up. If for any reason they don’t, you can make the arrangements yourself. Firstly you need your ‘Unique Transaction Reference Number’ which should be on your submission receipt and be 11 numbers long. You can they pay online, over the phone or by cheque.

tenants house rights

You could add the cost to your mortgage but it’s expensive

If you can’t afford to pay your stamp duty up front, you can add the cost of it to your mortgage, but be aware that this will cost you considerably more in the long run and may have an affect on other aspects of purchasing a home. If you are buying a house at £300,000 and need a mortgage of £220,000, adding the stamp duty will require you to borrow £229,000. If you have a mortgage term of 25 years than the additional £9,000 will end up costing you an extra £7,000 in interest.

Another thing to consider is whether the extra amount required will push you over the threshold for higher lending fees (if your lender applies them). The higher lending fee is charged when you borrow over a certain value of your home so if those extra few pounds push you into the higher lending fee bracket, you may end up with an additional set of charges.

If unsure ask your financial advisor

Buying a house is one of the biggest decisions and biggest stresses we can face in our lives and can end up being very confusing as well as expensive. Seek advise from family and friends who been through it and if in doubt you should talk to a financial advisor who can help find the best deals and advise on ways of making the most of your money.

 

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About Rebecca Robinson

About Rebecca Robinson

After spending the last 8 years juggling life as a mum of two, wife and working full time as a Project Manager for a global telecommunications company, Rebecca Robinson made the decision to follow her love of writing and took the plunge; turning her passion into a full time career. Since becoming a full time writer, Rebecca has worked with various media and copy-writing companies and with the ability to make any topic relevant and interesting to the reader, now contributes to The Working Parent on articles ranging from credit cards to teenage relationships. Ever the optimist, Rebecca's dreams for the future include a house in the country filled with children, dogs and horses in the field!

Website: Rebecca Robinson

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