Guide to Stamp Duty
by: Kate Tee
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The exemption, previously on properties up to £125,000, had been due to end in September.
But what is stamp duty? How much does it cost? And how does it affect you?
What is stamp duty?
Stamp duty, officially known as stamp duty land tax, is the tax you pay when buying property or land in the UK. It's charged at different rates according to the price of the home or land you're buying.
You must pay the tax within 30 days of completing the purchase:
Between £175,001 and £250,000* Stamp Duty % = 1%
Between £250,001 and £500,000 Stamp Duty % = 3%
Over £500,001 Stamp Duty % = 4%
*Due to revert to between £125,001 and £250,000 from 01/01/2010
So, if your new home costs £200,000 you'll pay stamp duty of £2,000. If your house costs £300,000 you'll have to pay £9,000.
Does everyone have to pay stamp duty?
Not everyone has to stump up - there are some exemptions. If you're buying a home for up to £175,000, you won't have to pay stamp duty - saving you up to £1,750. But the threshold at which the tax kicks is due to fall back to £125,000 from 2010.
You're also exempt from paying stamp duty if your home costs less than £500,000 and is carbon-neutral. Environmentally friendly properties costing more than this get a reduction of up to £15,000. But you must have a zero-carbon home certificate from an accredited assessor to qualify for the perk.
Stamp duty was previously waived for people buying a property costing up to £175,000 in a designated Disadvantaged Area. This no longer applies as the tax is being waived on all properties costing up to this threshold until the end of December, regardless of location.
5 top tips on stamp duty
1. Budget for it
Stamp duty can be a significant extra burden on top of the other costs associated with buying a house, such as lawyers' fees and home insurance. So, make sure you budget for it.
2. Add it to your mortgage
It's possible to add stamp duty to your mortgage - some lenders may even offer to pay it for you. But remember, if you borrow extra you'll be paying interest on it for the rest of your mortgage term, which could be 25 years. Doing it this way will cost you significantly more in the long run, so try and save the cash and pay it up front instead.
3. Know how much to pay
Be aware of the thresholds at which the different rates kick in. Buying a house for £249,000 will cost you £2,490 in stamp duty. Buy a home for just £2,000 more at £251,000, and your stamp duty bill will soar to £7,530.
4. Make the most of Government exemptions
If you're thinking of getting on the property ladder - act fast!
You'll only be exempt from stamp duty if you buy a home that costs £175,000 or less, by the end of the year.
5. Avoid stamp duty - go green
If you're looking for a more expensive home, why not find one that's carbon neutral? That way you'll not only save cash on the tax but on your energy bills too.
Article Source: http://www.ArticleStreet.com/profile/kate-tee-11796.html
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Find out more about stamp duty at http://www.confused.com/mortgages
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