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If you’re buying a house, Stamp Duty Land Tax (SDLT) can be a nasty surprise. What with the cost of the actual house – probably the most expensive thing you’ve ever bought – the solicitors’ fees, the conveyancing fees and stamp duty on top, it can catch a lot of buyers out.
First things first, what actually is stamp duty? Stamp Duty Land Tax was first introduced in the UK in 1694 under the joint reign of King William III and Queen Mary II. As with the introduction of Income Tax, Stamp Duty was brought in to raise funds for a war against France. Classic.
Initially, the scheme began as a transaction tax on items like hats and newspapers, but in 1765, the Stamp Act attempted to enforce these taxes on territories around the British empire. Unfortunately for the UK, it led to the Boston Tea Party: the catalyst to America’s War of Independence.
In modern times, stamp duty is used as a tax on property purchases. For a long time, a flat rate of 1% was paid on properties that cost more than £60,000. In 1997, then Chancellor of the Exchequer Gordon Brown changed this to 1.5% for homes over £250,000 and 2% for those over £500,000. In 2014, Chancellor George Osbourne then introduced a brand new structure on homes over £125,000. We still use this structure today.
To work out what you should be paying in stamp duty, check out our Stamp Duty calculator. You can calculate what you owe depending on whether you’re buying your first property, whether it’s a second home, the overall value of the property and more.
The Stamp Duty you pay is calculated based on the price of the property you’re buying.
In your case, £500,000.
As you’re a first-time buyer, you don’t pay Stamp Duty Land Tax on the first £300,000 of your purchase.
You pay 5% Stamp Duty on amount up to £500,000. For you, this is £10,000.
Your Stamp Duty Land Tax total is £10,000.
Congratulations! You’re buying a house.
As you may have heard, stamp duty is a little different for first-time buyers. (Woohoo!) As opposed to the rest of the property market, first-time buyers don’t pay stamp duty tax on properties that cost more than £300,000. If it costs more, you only pay the tax on the portion of the property that exceeds £300,000.
If you’re buying a home, make sure that you pay your SDLT within 14 days of signing the contract and being given the keys. It’s really important to make sure that it’s paid during this period to avoid facing fines or interest being added.
Usually, your solicitor can look after the paying of stamp duty, although it is possible to pay it yourself. Some buyers choose to pay stamp duty as part of their mortgage. But be mindful of the fact that if you choose this, it increases the amount that you borrow, and therefore the interest that you pay in your repayments.
Still not sure what to do? If you’re trying to get your taxes sorted and need a hand figuring out your next step, don’t hesitate to get in touch! Our friendly support team is happy to help. You can reach them on [email protected] or via the live chat on the homepage.
Don’t panic. We can help. We offer one-off, personal tax advice from an accredited accountant for just £119. Book a phone or video call to get your head around stamp duty, how to pay it, and what to do next. Learn more here.
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