Stamp Duty Land Tax, or “Stamp Duty” as it is commonly known, has been an increasingly profitable revenue source for successive governments. It was first introduced in 1694 in an Act: …for granting to their Majesties several duties upon vellum, parchment and paper, for four years, towards carrying on the war against France. That four year period ended long ago and, whatever, your views about Brexit negotiations, we are no longer at war with France, but the tax is still very much with us! Its main impact for most of us now is that it is one of the biggest costs we face when we buy a house.
Buying Your Home
Subject to the exceptions to which I refer below, Stamp Duty is payable on purchases for over £125,000, so it is a very real issue in this part of the world. The Duty is payable on land but not chattels. It is quite acceptable to apportion the purchase price between the house and chattels you are buying, but there are strict rules about what a chattel is and the value that can be allocated to it. You cannot, for example, say you are buying the house for £1 and the curtains for £124,999 – if it were that easy, nobody would ever pay Stamp Duty!
In recent budgets we have seen significant changes to the Stamp Duty regime:
Since 1st April 2016 purchases of “second properties” are subject to an additional 3% Duty. When the measure was announced, the Chancellor spoke about taxing “Buy to Let” purchasers, but the measure also applies to any second home, holiday home or even a main residence, costing more than £40,000. The extra tax is payable if you already have an interest in any property, anywhere in the world.
In an unusually romantic view taken by the Revenue, married couples are regarded as a single entity so, if one of them already owns a property, a purchase by the other will attract the extra duty.
If you own two properties you will not, however, have to pay the additional Duty on a purchase of another dwelling if you dispose of, and are replacing, your existing main residence. As ever “conditions apply”.
In November 2017 the Chancellor announced that Stamp Duty would be abolished for first-time buyers on purchases up to £300,000 and significantly reduced on purchases up to £500,000. This can lead to a very welcome saving of up to £5,000.
As always with tax legislation, there are conditions that need to be satisfied. The buyers cannot have previously owned an interest in any dwelling anywhere in the world and, if they are buying jointly, they must all satisfy that condition. The buyers must intend to occupy the premises as their only or main residence.
This article is not, of course, meant to give detailed tax advice, but just to give an overview of current Stamp Duty issues. As always, seek expert advice if you have particular queries.