Higher rates of stamp duty were introduced in 1997. It was seen as an easy way to raise additional taxes. Between 1997 and today the top rate of stamp duty has increased from 2% to 15%.
From 2014 it was determined that you would only pay stamp duty on the portion of the value of the bracket that your house purchase fell into. The stamp duty tiers were as follows:
Up to £125,000 – 0%
Over £125,000 to £250,000 – 2%
Over £250,000 to £925,000 – 5%
Over £925,000 to £1,500,000 – 10%
Over £1,500,000 – 12%
On a house costing £120,000 that you intend to live in there would be no stamp duty to pay. On a £200,000 property that you intend to live in there would be £1,500 to pay. Someone purchasing a home to live in for £1,000,000 would pay £43,750 in stamp duty.
As from 1 April 2016 any second homes now attract a higher rate of stamp duty. Anything other than your main residence will count as a second home.
You will pay the higher rate on any second home costing £40,000 or more. Effectively an additional 3% has been added to each of the tiers above as follows:
£40,000 to £125,000 – 3% rather than 0%
Over £125,000 to £250,000 – 5% rather than 2%
and so on until properties over £1,500,000 – 15% rather than 12%
If parents buy a property for their child and are named on the deeds while already owning a property they will be charged the additional stamp duty. Gifting a deposit will not be a problem – only part owning the property.
If you complete on the purchase of a new main residence while still owning your old home you will have to pay the higher stamp duty. However if you sell your old home within 36 months you can reclaim the extra stamp duty.
If you keep your old residence and rent it out and then purchase a new home to live in then you will pay the extra rate of stamp duty because you will own two homes.
If you sell your main residence and buy a new place to live it won’t be counted as a second home and you will pay the normal lower rate of stamp duty.
For advice on stamp duty or any matters concerning your house sale or purchase contact firstname.lastname@example.org or call 01425 279222 and speak to Helen Stewart