Many people probably put it down to just one of those annoyingly extra things to pay when buying your home. But what is stamp duty, why is it there and what do you need to know about it?
1. Stamp duty is a tax, raised by the UK government;
2. It started out as a tax on “paper transactions” and therefore applied as much to the purchase of shares, for instance, as it did to property;
3. Strictly speaking, in fact, stamp duty was the name given to this particular form of tax before 2003;
4. Since 2003, it has gone by the formal title of Stamp Duty Land Tax – though you’re still more likely to hear estate agents and solicitors to refer to it in the shorthand “stamp duty”;
5. It is a tax paid by the buyer of the property only, and not by the seller;
6. There is a sliding scale of Stamp Duty Land Tax, the rates of which are based on a percentage of the price paid for the property;
7. Until March if this year (2012), there was no stamp duty to be paid if the home was bought for less than £125,000, a 1% tax on purchases of £125,001 to £250,000, 3% on purchases of £250,000 to £500,000, and so on, up to a 15% tax on particular types of purchases over £2 million;
8. Perhaps the most important thing to know about Stamp Duty Land Tax, however, is the change made by the UK Chancellor in his budget of March 2012;
9. This grants relief from stamp duty for anyone buying a property for less than £250,000;
10. Since the majority of those properties were likely to have been in the price band £125,000 to £250,000 – and a previous tax of 1% – this means you can now be saving yourself a handy £2,500;
11. The oddity (and oddities often arise from such banding techniques), of course, is that no one is likely to try to sell a home for £255,000!
12. At that price, the buyer is going to have to fork out 3% in Stamp Duty Land Tax i.e. £7,650 – when there would be nothing at all to pay on a home that cost just £5,000 less.