As you enter the house buying process, you’ll no doubt be tightly managing your finances. With a number of costs and taxes to account for, you could be forgiven for losing track. One recent alteration to the fees you’ll pay when purchasing a new house relates to stamp duty. In 1997, Gordon Brown revised the stamp duty system in response to rising housing prices as a source of government revenue. Over 15 years later and for much of the same reason, in December 2014, the 1997 system has been revised to become fairer by progressive taxation. So if you are thinking about buying your first home or just an overview of how the new system works, then look no further.
The good news is that £4,500 is the amount saved on an average price home but how will this system impact on you?
As you can see from the image above, for any property up to £125,000 you won’t have to pay a thing; this is very much the same as the previous system. Under the old system you would have been liable to pay 1% on homes between £125,000 – £250,000, whereas the new system 2% is the threshold. However, the current system is a progressive tax where you will only pay a percentage based on the amount you are over any given threshold. This in turn means you’ll be financially better off under this system than the last.
In addition, under the new rate you’ll pay 5% on any property up to £925,000 progressively. The old system would have meant that you’d have paid 3% between £250,000 – £500,000 and & 4% for anything over £500,000. This ensures that anyone buying a home under the £937,000 mark will pay less or the same, treasury figures show.
Paying stamp duty and possible exemption:
Although the system is now a progressive system and is therefore fairer, there are still some ways that you can either reduce paying the tax or not pay it at all.
Paying stamp duty:
It is important to pay stamp duty or a £100 fee could be incurred. Your solicitor usually takes care of this but should you choose to do it yourself, then you need to complete the form and send it off. It is your responsibility to ensure that all documents are completed within the 30 days on completion of a deal.
Think about the band system:
The first thing to do, regardless of the system or not, is to ensure you get the best possible price for the house. This may be the difference from being put in one band to another. For example, if the house was on the market for over £125,000 and you as the buyer was able to get a deal for just under that figure then you wouldn’t be liable to pay anything at all.
Transferring of property:
If you transfer the deeds of your home to someone else, they will not have to pay the stamp duty on the market value of the property. This therefore means you could be eligible to pay less stamp duty if you pass the house over as a gift or leave it in your will.
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