How To Avoid Paying Stamp Duty

17 Sep How To Avoid Paying Stamp Duty

When a property is bought in the UK, the buyer is required to pay a one-off tax called Stamp Duty. Whether it’s a freehold or leasehold, buyers must pay tax depending on the price of the property.

In a bid to encourage buyers to the market, changes to Stamp Duty rates were announced in the autumn of 2014.

The Old System…

Under the old system, a house purchased for £250,000 would be charged at a 1%. At this price point a total of £2,500 required to be paid. If a property was sold for £250,001, a charge of 3% would be applied which would mean the buyer would have to pay just over £7,500.

This payment structure was deemed as unfair and in many cases, prevented first time buyers from purchasing property in the higher tax bracket.

Stamp Duty Reform…

Tax tiers under the new system have been altered to encourage buyers to the market. Rates are now only applied to the percentage of the property which falls within in the respective tier. For example…

Click here to calculate your Stamp Duty fees.

The buyer’s solicitor usually handles the payment which is required within 30 days of completion. Failure to do so will result in a fine of £100 if the payment isn’t filed within 3 months of the deadline and £200 if it is paid after 3 months of the deadline. Interest is also applied to late payments.

How to avoid paying Stamp Duty…

Sadly there is no way to avoid paying Stamp Duty rates if the property is priced over £125,001 however, certain circumstances allows individuals to avoid paying the tax.

If a property is left to someone as part of a will, or if the property is assigned during a divorce, an individual will not have to pay Stamp Duty.

Buyers should be aware that they are required to submit a return even if their property costs less than £125,000. The liability is zero and the buyer’s appointed solicitor should advise accordingly.

Tips for Buyers

Individuals who are looking to expand their property portfolio may benefit from higher returns if they purchase a property under the £125,000 threshold.

In recent years, property prices in the UK have been on the up however, there are still low entry level options available on the market.

Savvy investors may wish to contact property consultancy like Experience Invest who offers low entry level property investments. Most developments are priced under the £125,000 mark which means that investors are not required to pay Stamp Duty taxes. The lower price point allows investors to secure a higher NET return and avoid paying Stamp Duty.

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