Stamp Duty – Could You Be Caught Out?
Earlier this year new stamp duty land tax (SDLT) rules were put in place – but did you know that not only Buy-to-Let Investors could be affected? Some first time buyers could find themselves paying the extra 3% surcharge as well as those that inherit a residential property then go on to purchase a second property.
Leighann Richards of The Wilkes Partnership explains.
The higher SDLT rates are 3% above current rates and are as follows:
Purchase price Basic SDLT rate SDLT rate on additional properties
Up to £125,000 0% 3%
Between £125,000 and £250,000 2% 5%
Between £250,000 and £925,000 5% 8%
Between £925,000 and £1.5 million 10% 13%
Over £1.5 million 12% 15%
The rules are complex and it would depend on certain factors to see whether or not the 3% surcharge would be payable on your purchase therefore it is advisable to discuss this with a specialist before committing yourself to a purchase.
Historically, when buying a home you would calculate your budget, find a property, agree the price, apply for a mortgage, and only then instruct solicitors. These new complex stamp duty rules have turned this process on its head. Now it is advisable to talk to a solicitor first to determine your stamp duty liability so that you are aware of this cost whilst negotiating the purchase. Otherwise you could be in for an unpleasant surprise after you thought you had considered all of the costs involved. You could find yourself needing to increase your budget or lose the property and go back to square one.
The complexity of the new SDLT rules doesn’t stop there. If you own your own property as a single person and then go on to purchase a property with your partner for your family to live in you could be liable to pay the higher rates. And if parents want to help their children get onto the property ladder advice should be sought from a specialist in order to determine whether the transaction attracts the additional 3% SDLT surcharge.
It is best to seek legal advice as early on in the process as possible, this could save you money by giving you room for negotiation.
If you need advice on property purchase matters contact Leighann Richards at The Wilkes Partnership Birmingham firstname.lastname@example.org or 0121 233 4333.