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UK Stamp Duty Rates Explained

House Network

The Stamp Duty Land Tax is a charge that anyone buying a property over the value of £125,000 has to pay on the land. The Stamp Duty rates you pay are worked out using a tiered system depending on the value of your home. With new changes to Stamp Duty for buy-to-let properties this April, it can all get quite confusing. Here’s the basics of Stamp Duty explained:

What are the current Stamp Duty rates?

How much Stamp Duty you are required to pay is determined by the price of your home and whether you have a residential property or a buy-to-let home.

Residential properties

For home buyers owning a residential property to live in, the different Stamp Duty thresholds are quite simple:

  • Houses below £125,000 are 0%
  • 2% on homes priced between £125,000 and £250,000, which is £2,500
  • 5% on the value of properties above £250,000, which is £2,500

It is a legal requirement that you pay your Stamp Duty within 30 days of buying a new property and you can be charged extra interest and even face a fine if you fail to pay.

Buy-to-let Properties

For those looking to purchase a buy-to-let property, as of April 2016, as a result of George Osborne’s announcements in the autumn budget, these rules apply:

All second homes and buy-to-let properties will have an additional 3% Stamp Duty Charge added. This is with the introduction of a new threshold, starting on homes above £40,000 in order to capture all buy-to-let transactions.

How can I calculate the amount of Stamp Duty I’ll need to pay on a new home?

If you’re feeling confused about the amount of Stamp Duty you might have to pay on a new home, use House Network’s free Stamp Duty Calculator to easily find out the new figure. Using the Stamp Duty calculator, UK home owners can look at how much the Stamp Duty is on a variation of different priced properties to get a good idea of the price range they’re looking at. Stamp Duty rates can add a significant sum of money to the price of a new home, especially on buy-to-let properties, so it’s always beneficial to check this out before buying.

What do these changes mean if I sell my home?

If you’re looking to move from your residential property to another residential property your Stamp Duty rates will probably change. If you’re looking to buy a home in the next tiered bracket of Stamp Duty, for example you move from a £150,000 home to a £255,000, you will have to pay the higher rate of 5% rather than the current 2% due to the price of the home being in the next tier.

However, if you buy a new buy-to-let property or a second home, as of April 1st 2016 you will have to pay the original Stamp Duty price plus the additional 3%. This is a substantial increase, meaning that instead of paying 0% on a home below £125,000, you’ll now have to pay 3%. The new tax brackets have been introduced in the hope of pricing out second home buyers and buy-to-let investors to help more first time buyers get on the property ladder.

Although the Stamp Duty rates on property can seem confusing at first, after reading this, hopefully they will all seem a little clearer. Don’t forget to use our Stamp Duty calculator to find out more for yourself.

Image courtesy of iStock