What is Stamp Duty?
In today’s video we’re going to be talking about stamp duty what is it who pays for it and why you may need to make sure you understand how it’s calculated.
Hi everyone, Ugo Arinzeh a with Onyx property consultants powered by Keller Williams, thanks for watching. Be sure to subscribe and hit the bell for notifications as I put out weekly content talking about London property market, all things London property related and answering your questions. So, we’re going to be talking today about stamp duty – what is it and who pays for it? Stamp duty in essence is a tax on purchase at the transfer of a property it’s again it’s not a concept that many foreign buyers might be used to, especially if they’re coming over from America, but I work with a lot of buyers and it’s definitely something that I make sure that they understand because it isn’t something that you can roll up into a mortgage it’s an amount you’re going to have to pay out of pocket.
Stamp duty started actually back in the 1950’s but back then it was as low as 1% on property values over £30,000 since most properties were valued around £20,000 most people didn’t pay stamp duty.
As time has evolved the government has actually increased stamp considerably over the years and I believe it’s one of the most significant contributors to the current London property market slowdown that we’re seeing right now. In December 2016 the government instituted a new tiering system on stamp duty, and it meant that you were only charged on the amount that went over a certain amount but it put in place at the highest tier of 12% for properties over £1.5million. So, this was significant, and I believe a lot of foreign investors and buyers absolutely pulled off their desire to buy property because it was becoming incredibly expensive.
In addition to that 12%, if you own a property in a company structure, you could be paying as much as 15% tax, so again, very considerable.
In addition to that, in April 2016 the government added an additional 3% if it was a second home for you or you were buying as a buy-to-let investor so again an additional tax that you have to pay now if it’s your second home anywhere in the world. So all of these things have had a dramatic effect on the London property market given that it’s something I absolutely advise my sellers to factor in because it’s meaning buyers are paying considerably more to go own a property than they did say five or six years ago and given that they can’t roll it into a mortgage they’re going to have to budget and come out of pocket for that amount. The good thing is, with the changes, the government definitely skewed more of the burden of stamp duty to higher value transactions, they have given first-time buyers a fair amount of relief, so if you’re a first-time buyer and you’re buying a property up to £500,000, you don’t pay any stamp duty on the first £300,000 and for the amount between £300,000 and £500,000 you only pay 5%. Unfortunately, if the property that you’re looking at is more than £500,000 and that could be quite likely in London, then that means you’re treated as if you’re a repeat buyer.
Unfortunately, that’s the nature of stamp duty it’s definitely something that’s not straightforward to calculate I keep a handy app on my phone so I can calculate it for potential buyers as they’re looking at properties, so down below I’ll include a link to that stamp duty calculator as well as other articles to give you a better sense as to stamp duty.
If you have any other questions about renting, selling, or buying property in London make sure you get in touch.
That’s Ugo Arinzeh with Onyx Property Consultants, powered by Keller Williams.
