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UK Mortgages & Loans -> Stamp Duty

Stamp Duty (or Stamp Duty Land Tax as it is officially called since December 1st 2003) is a levy that is applied to land and property transactions in the United Kingdom. It is the responsibility of the purchaser to ensure that the appropriate return forms are completed and submitted to HM Revenue & Customs within the allowed timeframe (currently a maximum of thirty days after completion of the transaction). In practice, all of the documentation and returns process will be handled by the purchaser’s solicitor, although legally it is the purchaser’s responsibility to make sure the returns are made.

The rate of stamp duty charged depends largely on the value of the property being purchased. There are four bands into one of which a property will fall, these bands (which apply to residential properties) are listed below.

Some properties in certain areas do qualify for disadvantaged area relief, this effectively pushes up the upper boundary for the zero-percent bracket, taking it from £125k to £150k. Properties in these disadvantaged areas up to the one hundred and fifty thousand pound mark are therefore exempt from any stamp duty, which can present a significant and vitally important saving to those buying in such areas.

While the percentage figures may be low, ranging from one to four percent, the actual amount that this comes out to can be a significant cost when buying a property, as the percentage is calculated against a high value sum. The stamp duty on the average UK property of £205,286 is a not inconsiderable £2,052.86 – those buying a property of £280,000 will be faced with a stamp duty of £8,400.

The stamp duty rates have quite a large influence on the pricing in the property market, in most cases the prices of properties will tend to stay within certain bands – you’ll not often see properties priced at £255,000 for example, as this would push it into the three percent bracket. There tends to be a large step up from the quarter of a million pound point, as pricing close to that figure doesn’t make sense for the simple fact that the buyer will want to negotiate hard to try and push the vendor to drop the price enough so it falls within the one percent bracket.

When planning on buying a house, it is important to factor in the cost of the stamp duty into the overall budget. It is a significant cost – the largest ancillary cost involved in the whole house-buying process, and so it needs to be budgeted for.