Stamp Duty Guide for Buying Property in London

stamp duty buying property london

Stamp duty is a topic that causes a great deal of confusion for a lot of people. In fact, many people are even unsure of exactly what stamp duty is or are not even aware of its existence (which is a shock for those when they have to pay it).

However, once explained, stamp duty becomes a seemingly easy topic to understand, and you'll easily be able to understand everything you need to know and more if you are looking to buy a property in London.

In this article, we will be telling you all of the essential information you need to know about stamp duty when looking to buy a property in London, as well as why understanding stamp duty is so vital. 

 

What Exactly Is Stamp Duty?

 

Stamp duty is a one-time payment that you may have to pay when buying a new house if you meet certain requirements.

We will go into more detail as to what these exact requirements are later on in the article, but the main factor that indicates whether or not you will have to pay stamp duty is the cost of the property you are looking to buy as well if you are eligible for any first-time buyer schemes. 

Stamp duty is essential a land tax or levy which is paid to HM Revenue & Customs, with a higher tax being placed upon those buying more expensive homes or a second home. 


Do You Need to Pay Stamp Duty & If So, How Much?

 

Like mentioned before, whether or not you will be required to pay stamp duty is dependent on a wide array of factors, with the main one being the price of your home. Furthermore, this point may also change depending on when you are reading this article as there as some changes taking place in the near future regarding stamp duty. 

Until the 30th of September, you will not have to pay stamp duty if your home costs under £250,000. If your home costs between £250,001 and £925,000, you will have to pay a 5% stamp duty tax, meaning that you will have to pay an extra 5% of whatever the cost of your property was to HM Revenue & Customs. If your property resides between the £925,001 and £1.5 million bracket, you will be required to pay 10% stamp duty tax. Last but not least, if your property costs over £1.5 million, you will have to pay 12% stamp duty tax. 

However, all of the information we just stated is going to change after 1st October 2021, so we will go through these changes and how much stamp duty tax you'd be expected to pay on a property after this date. 

From the 1st of October 2021, you will not have to pay any stamp duty tax on any properties under £125,000, unless you are a first-time buyer. If your property costs between £125,001 and £250,000, you will have to pay a stamp duty tax of 2%. If the property you are looking to buy sits between £250,001 and £925,000, you will be required to pay a stamp duty tax of 5%. For those of you who are looking to buy a property between the £925,001 and £1.5 million range, expect to pay a 10% stamp duty tax. Just like before, if you are looking to buy a property for more than £1.5 million, you'll be looking at paying a 12% stamp duty fee. 

If you already have a property and are looking to buy a second property, you will have to pay an additional 3% on top of whichever price bracket range said property falls in using the information above. 

As you can see from the above section, stamp duty tax can quickly become an extremely pricey fee, especially for those who were unaware that they had to pay it. Luckily, there are a few relief schemes out there, and if you are a first-time property buyer purchasing a property under £500,000 then you will get reduced rates of stamp tax. 

 

How & When to Pay Stamp Duty When Buying Property in London

 

After purchasing any property within the brackets that require stamp duty taxes to be paid, you will have up to 14 days to file a return to the HMRC. This can catch a lot of people off guard, as unless you have someone helping you through the process you may have been completely unaware that you had to do this at all. 

However, in the majority of cases, your solicitor or conveyancer will file, calculate and take care of the stamp duty tax on your behalf.

If you miss the 14-day deadline and have still not sent your stamp duty tax to the HMRC, you will receive a plethora of penalties such as an additional fee for submitting the tax late as well as interest for every day that passes while the debt remains unpaid. 

 

Conclusion on Stamp Duty

 

After reading this article, you should have more than just a basic understanding of what stamp duty is and how it works, and you should have no problem when trying to buy a property in London.

It's so crucial to understand topics like stamp duty in order to ensure that you know what you are getting into when trying to purchase any property in London, as well as to make sure you aren't hit with any unforeseen costs that you may not even be able to afford.

If you are looking to buy a property in London and want next to instant access to any new property in the London housing market, feel free to check out TRPE- The Real Property Experts. We have properties up for sale all over London in every borough, and our expert team members can help you on every step of your journey.

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