Stamp duty is a tax levied on the purchase of a property. It is paid by the buyer unless they fall under an exemption category, such as being a first-time buyer. Let’s take a look at why this tax is in place and at which point in the process it has to be paid.
Stamp duty is a tax that is paid as a lump sum when buying a property over a certain threshold (£125,000.) It is payable at different rates according to the property and the buyer’s circumstances. First-time buyers are largely exempt, so long as the property they are buying costs less than £300,000. In England and Northern Ireland, its full name is the stamp duty land tax; in Wales, it is the land transaction tax; in Scotland, it is the land and buildings transaction tax.
Buyers have to pay the tax because it is levied by HMRC in the same way that income tax and VAT are levied on transactions that transfer or release value. In England and Northern Ireland, stamp duty applies on homes valued at more than £125,000. It is an important way for the government to raise income through taxation but there have been calls to raise the thresholds upon which stamp duty is due. Other exemptions and reductions apply in certain circumstances, such as when charities are buying property for their work or social housing landlords are buying property to let.
If you complete a property purchase, you will have 14 days to pay the stamp duty from the day of completion. At this point, the stamp duty becomes due. The payment is usually paid by your solicitor, who will have advised you of the amount required to settle the bill. You can find conveyancing specialists and conveyancing solicitors in Hemel Hempstead with ease, such as https://www.samconveyancing.co.uk/Conveyancing-Solicitors/conveyancing-solicitors-hemel-hempstead. They will be able to advise you on the house buying and selling process and manage the legal process for you.
It is important to pay stamp duty within 14 days of completion, as fines and interest can be levied on top of the stamp duty charge if you exceed this period.
As mentioned above, your solicitor or conveyancer will usually make this payment for you; however, if you make the payment yourself, it is easy to do so. You will need your UTRN (unique transaction reference number), which is found on the online filed submission receipt; alternatively, if you have completed on paper, you will have a stamp duty return in hard copy. With this reference number, either go online or call your bank, use the HMRC bank details you will be provided with, and make the payment. It will take three working days to clear, so it is important to take this into account when timing the payment. There is also the option to pay by cheque.
A return has to be completed even if there is no stamp duty due unless the purchase price is less than £40,000.
Stamp duty is an essential cost to budget for when you are buying a property. It can be expensive, especially for larger properties, so it is important to take this into account. Your solicitor can calculate the stamp duty fee for you during the house purchase process so that you can be prepared and ready to release the funds either through savings, equity release, or by extending your mortgage as necessary.