Tag: tax

What is Stamp Duty? How much will I pay?

What is Stamp Duty? How Much Will I Pay?

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Buying a house is expensive and difficult. When you get towards the all-important business end of the deal, it’s vital to question everything and seek clarity on all aspects of the process. So let’s deal with the elephant in the room. What is Stamp Duty? And how much will you pay? We all know you need to pay Stamp Duty, but what do you actually know about it?

What is Stamp Duty?

First-time buyers have a lot to think about!

When you buy a home in England, Northern Ireland or Wales costing more than £125,000, you need to pay Stamp Duty Land Tax. If you’re buying a second home, this drops to £40,000. If you’re buying a second home or buy-to-let you’ll also have to pay an additional 3% in Stamp Duty as well as current rates.

What About Scotland?

You don’t actually have to pay Stamp Duty in Scotland. Before you pack up your bags and head north, Scottish home buyers don’t get away that easily. An almost identical tax exists named the Land and Buildings Transaction Tax. It’s the same style of lump sum tax – the only difference is the thresholds. More about that later.

How Much Will I Pay?

The more expensive a property, the more stamp duty you’ll have to pay. This goes up in bands and you’ll have to pay a percentage of the cost. You do however only pay the higher percentage on what is above that threshold.

Below you can find a table to help you with working out your Stamp Duty Land Tax:

Stamp Duty Table

Below is a table to help those living in Scotland work out their Land and Buildings Transaction Tax:

Land and Buildings Tax Rate Table

Money Saving Expert offer the following example to better illustrate this:

England, Northern Ireland and Wales:
If buying a property for £300,000
You pay nothing below £125,000, which is £0
You pay 2% on between £125,000 and £250,000, which is £2,500
You pay 5% on the value of the property above £250,000, which is £2,500
So in total this means you’ll pay £5,000 (£0+£2,500+£2,500).

Scotland:
If buying a property for £300,000
You pay nothing below £145,000, which is £0
You pay 2% on between £145,000 and £250,000, which is £2,100
You pay 5% on the value of the property above £250,000, which is £2,500
So in total this means you’ll pay £4,600 (£0+£2,100+£2,500).

If you don’t want the fuss with working out how much Stamp Duty you’ll pay, The Money Advice Service offer a handy Stamp Duty Calculator here.

How is Stamp Duty Paid?

Once you’ve completed the home buying process (signed the contract, received the keys) you’ve got 30 days to pay Stamp Duty. If you don’t pay within this time, you could be fined and charged interest. Your solicitor usually deals with this and will encourage you to pay immediately. Some are known to require the cash before completing the purchase. Having said this, the legal responsibility is yours – so don’t neglect it.

If you’re moving home, be sure to get a full and comprehensive understanding of your new area. Fill out a property detective report and find all you need to know about local amenities, noise, crime rates, schools, flight paths and more. Enter your postcode to view your Property Detective report here.

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Homeowners risk financial penalties as controversial new EU directive comes into effect

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Homeowners across Europe are being warned of potentially ‘significant ramifications’ following the coming-into-effect today of the much-aligned European Radiative Emissions Directive, colloquially dubbed the ‘tarmac tax’ by some in the media.

 

 

What Is ‘Tarmac Tax’

 

First proposed in 2005 by Dutch representatives within the European Commission, the Directive aims to reduce the effects of climate change by discouraging developers from building large areas with reflective surfaces, whose combined effect is said to reflect the equivalent of 14 terra joules of energy back into the lower atmosphere every minute, increasing air temperature and causing the formation of cloud layer at higher altitudes than normal.

 

The science behind EU Directive 408F/00IS is not without scrutiny; earlier this year Spanish scientists from the prestigious Ramon Facility for Advanced Climate Change Analysis (RFACCA) poured cold water on the idea, saying the physics was ‘unproven at best…and dangerous at worst’. The ruling came into effect at 00:01am earlier today, causing a headache for the Government in the run-up to what many expect to be the closest general election of recent times.

 

What effect will ‘Tarmac Tax’ Have On Homeowners?

 

Firstly, new build developers are to be required to pay a surcharge across each developer in proportion to the square meterage of ‘unadopted space’ (e.g. car parks, driveways) within their remit. This will have the effect of bumping up new-build prices by an estimated £400 per property on average, depending on size.

 

But for those who already own a home, the Government may be forced to apply the fee via a Council Tax surcharge: something that its political opponents are calling ‘an own goal for the Conservatives and a shot in the arm for UKIP’.

 

What this means in practice remains unclear, but ‘informal guidance’ debated alongside the Directive indicates that homeowners might be expected to measure and declare the size of any driveways and patios within their property, with a resulting tax surcharge on these applied from 2016 onwards. The Government –  it is reported – were up until the dissolution of Parliament a few days ago said to be split as to whether the surcharge would be within the remit of the Valuation Office Agency (VOA) or HM Revenue & Customs (HMRC).

 

At Property Detective we believe that the Tarmac Tax is an unfair financial penalty that falls foul of the rule of law; and that retrospective measures to tackle climate change need to be directed at Government, not the man on the street. But it’s just another firm reminder that it’s important to research a property purchase properly to account for hidden costs.
Need help researching a local area? Why not give Property Detective a go to find out a whole host of important information ensuring you make an informed choice when moving house?

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