How stamp duty works and who pays it
The chancellor could be about to change the rules. Here's how you might benefit
Chancellor Jeremy Hunt is reportedly set to deliver an early Christmas gift to homebuyers, by cutting stamp duty in a bid to boost the UK's ailing property market.
Stamp duty is "one of Britain's most hated taxes", said The Telegraph, an "unwelcome cherry on the cake" after having to find a mortgage deposit and paying for legal fees when buying a home.
Hopes are growing that Hunt will announce changes to the tax in next week's Autumn Statement, said The Times, as healthier public finances have given him "more fiscal headroom than expected".
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More than £15 billion was paid in stamp duty during the 2022/23 financial year. Here is what you need to know about the controversial tax.
What is stamp duty?
Stamp duty is a tax you may have to pay if you purchase a residential property or a piece of land in England or Northern Ireland above a certain price.
Buyers in Scotland pay a Land and Buildings Transaction Tax and in Wales there is a Land Transaction Tax.
UK nations have a "progressive stamp duty rate system", explained MoneySavingExpert. So, rather than paying a single rate on the entire purchase, you pay different rates on different parts of the property's value.
Who pays stamp duty?
Stamp duty is paid by the person buying the property, and your solicitor will file a return to HMRC when your purchase completes.
The amount depends on the value of the property and whether you're a first-time buyer, explained NerdWallet. Sometimes stamp duty "doesn't need to be paid at all".
There is nothing to pay on the first £250,000 of a property purchase. Then buyers pay 5% on anything between £250,001 to £925,000, 10% on the next £575,000 and 12% on anything above £1.5 million.
First-time buyers don't pay any stamp duty on the first £425,000 of a purchase and will owe 5% on the portion from £425,001 to £625,000.
Landlords and anyone purchasing an additional property that isn't their main home has to pay 3% on top of the existing rates.
You can usually borrow more on your mortgage to cover the stamp duty, added MoneySavingExpert, but it is "vital to be aware of the cost", as it means you also pay interest on that money.
Will stamp duty be reformed?
There have been lots of stamp duty changes in recent years, said The Telegraph, as ministers use it "as a lever to pull up and down" to support the property market.
There was a stamp duty holiday on the first £500,000 of a property purchase during the pandemic, but that has been blamed for a rise in house prices. Estate agents including Knight Frank argue that a similar policy now would be "more impactful", said Mortgage Solutions, as demand is being "limited by various economic factors".
Hunt is reported to be considering making tax cuts in this month’s autumn statement to boost the economy now rather than next year’s Spring Budget, "amid fears that any delays could risk his newfound headroom evaporating", added The Times.
The Treasury is considering "raising the thresholds" for how much stamp duty is paid, the newspaper said. Other ideas include a stamp duty exemption for downsizers to free up property stock, said Estate Agent Today. Richard Davies, chief operating officer at property brand Chestertons, said this could be a "crucial step" in assisting those who want to move to a smaller property".
Property experts have also suggested a "more radical approach", said Mortgage Strategy. Evelyn Partners' head of tax, Sian Steele, told the publication that charging stamp duty to sellers rather than buyers would "both incentivise downsizing and boost new buyers entering the market".
However, this may take "too long" to implement, she said, so wouldn’t give the government the "pre-election boost it seeks".
Not everyone supports reforms, said The Intermediary, with some "ridiculing it as a pure vote-grabbing exercise" that will provide "more artificial support".
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Marc Shoffman is an NCTJ-qualified award-winning freelance journalist, specialising in business, property and personal finance. He has a BA in multimedia journalism from Bournemouth University and a master’s in financial journalism from City University, London. His career began at FT Business trade publication Financial Adviser, during the 2008 banking crash. In 2013, he moved to MailOnline’s personal finance section This is Money, where he covered topics ranging from mortgages and pensions to investments and even a bit of Bitcoin. Since going freelance in 2016, his work has appeared in MoneyWeek, The Times, The Mail on Sunday and on the i news site.
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