In the first place, what is stamp duty? This is a form of tax payable after you have purchased land or property that is over a certain price. It applies in Northern Ireland, England, and Wales. However, if you buy property in Scotland, you pay Land and Building Transaction Tax but not Stamp Duty. You are supposed to submit your Stamp Duty Land return within 14 days of successfully completing the purchase. This is a requirement by the HMRC. Failure to which a penalty will take effect, and you may have to pay the tax with additional interest.
What if the property was below the Stamp Duty threshold?
Good question! Currently, the Stamp Duty threshold for residential properties is £125, 000 while for the leasehold properties stands at £150, 000. That means you will be liable to submit the tax for any property that you purchase above these figures. Now, if the property is below the threshold, you will not pay the tax. However, your solicitor or conveyancer must fill and submit a return to HMRC despite the fact that you are not supposed to pay for any Stamp Duty.
How do you pay Stamp Duty?
In most cases, many people prefer that their conveyancing solicitor or solicitor pay the Stamp Duty because that is their job. Usually, your conveyancer will deal with any payment due as well as handle the Stamp Duty return. However, there is no big deal as you can do it yourself. The principle thing is that you must ensure on-time payment either way. You will also want to ensure the submission of the returns for the property costing below the Stamp Duty threshold to avoid problems with the authorities.
So can Stamp duty be reduced or avoided?
Yes, in some situations Stamp Duty is not payable even if the property values above the threshold. The amount can also be lowered if payment is a must in other circumstances. However, a buyer of a property that decides to do everything on their own may not remember situations that are supposed to work to their advantage. That is why engaging a professional conveyancer or solicitor is important.
When the price of the property is a bit higher or within the band, ask the estate agent or seller to lower the price below the Stamp Duty threshold. That way the tax is avoidable. The other case is when you are separating from your spouse. You are not liable to Stamp Duty payment for the property you receive in such a situation. This is because no trade is taking place. Moreover, lastly, if you are gifting someone with a property be it a friend or relative they also won’t have to pay the tax. On the contrary, if you are exchanging property with another person, both of you are liable to pay Stamp Duty separately based on the market value of the property each one receives.
Is that all about Stamp Duty payment? Nope. Things are different when it comes to second-hand homes and buy-to-rent properties. Get in touch with an expert solicitor or conveyancer to know more.