Guide Options
The YouMove Guide to Buying
Stamp Duty
Don't forget to include the cost of stamp duty (also known as SDLT — Stamp Duty Land Tax) when working out what you can afford to buy.
Stamp duty is paid by the buyer on the value of the property they purchase and is calculated as follows:
Purchase price SDLT rate
Up to £175,000 (until 31 December 2009)* Zero
Over £175,000 to £250,000 1%
Over £250,000 to £500,000 3%
Over £500,000 4%
(HMRC)
Unfortunately, once the property moves into a higher band you will pay the higher rate of tax on the entire price.
For this reason sellers will sometimes use stamp duty rates as a negotiation tool by setting an asking price that falls just above one of the thresholds. This allows them to bring the price down during negotiations in order to "save" you thousands in tax.
To illustrate this, consider the difference in tax between two properties — one priced at £250,000 the other at £251,000.
On the first property the stamp duty payable will be £2,500 or 1%. On the second property, however, stamp duty jumps to £7,530 or 3%, despite the property costing only £1,000 more.
For this reason, if a property is priced at just above one of the thresholds you should always expect to pay below it unless the market is highly competitive.On the first property the stamp duty payable will be £2,500 or 1%. On the second property, however, stamp duty jumps to £7,530 or 3%, despite the property costing only £1,000 more.
* Note that the temporary SDLT threshold of £175,000 for residential property transactions does not apply to:
- the assignment of an existing lease which has less than 21 years to run
- the grant of a lease for a term of less than 21 years
In these cases the normal thresholds of £125,000 (£150,000 if the property is situated in a disadvantaged area) apply.
