What is Stamp Duty?
Stamp duty on properties can seem a bit confusing. It’s something that is often changing in regard to fees and the rules on stamp duty too. For first time buyers, it is often something that is forgotten about in the purchase of their first home. However, many homebuyers will need to put money aside for the stamp duty and the cost of it can come as a nasty surprise if you are not prepared for it.
The Rules of Stamp Duty
In basic terms, stamp duty is a tax that is a charge on ‘land transactions’. Stamp duty in England and Northern Ireland applies to the following land transactions:
- Freehold, leasehold and new properties
- Shared ownership properties
- Residential and commercial properties
- Land
Stamp duty will also apply when land or property has been transferred in exchange of payment. An example of this is when you buy a share in a house or take on a mortgage.
How Does Stamp Duty Work?
The cost of stamp duty varies from person to person based on the property being purchased and the financial state of the person. For example, whether you are a first-time buyer or buying a second home, the stamp duty cost will vary. The amount that the property is worth will also change the stamp duty owed.
As a home or land buyer, you will be added to a category dependent on who you are and what you are buying. You will then be assigned an amount of stamp duty to pay. This stamp duty tax will then need to be paid to HMRC.
When Is Stamp Duty Tax Paid?
When buying property or land, whether you are liable for stamp duty or not, you will need to submit a Stamp Duty Land Tax return. This will need to be sent to HMRC within 30 days of completion of the purchase of the land or property. If this is not filed within 30 days, you may have to pay a penalty cost of £100 plus interest. This is even the case if you are not liable for stamp duty tax due to your circumstances. The Stamp Duty Land Tax return must be completed, regardless.
In most house sales this will be deal with by the solicitor who will sort out the return and the fees for you. However, it is worth checking that this is the case for your own peace of mind.
When purchasing a property our estate agents in Peterborough will be able to give you a rough idea of the cost of stamp duty you can expect. This will enable you to put some money aside that is earmarked for the stamp duty tax.
Please speak to our team about our recommended solicitors and mortgage advisors. Not only will they be able to offer you great advice, but as our clients you will get preferential rates too.