The impact of stamp duty on buying a home
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The last 12 months have seen a housing boom, which many experts have attributed to the Government’s lowering of the stamp duty threshold last year.
Although often referred to as a stamp duty holiday, the tax was not scrapped altogether and homeowners buying properties at £500,000 or more still had to pay some stamp duty, while those purchasing a buy-to-let property also had to pay stamp duty. Saying this, many home movers and some first-time buyers were able to save thousands of pounds in stamp duty tax over the last year. However, house prices have risen during this time, so some have questioned whether home buyers have made much of a saving at all.
From 1 October 2021, however, the stamp duty reverts to what it was before the stamp duty holiday was introduced. This means that when buying a property, many buyers will once again have to pay the full stamp duty tax which can add thousands to the purchase.
How much is stamp duty?
All property buyers are liable to pay stamp duty tax when making a property, however there are some exceptions. Those purchasing a residential property in England or Northern Ireland priced £125,000 or less would not have to pay any stamp duty tax, while first-time buyers can purchase a property up to the value of £500,000 without paying stamp duty on the first £300,000 of the property value. Stamp Duty is then payable on properties above these amounts, with the actual amount depending on the cost of the property. Additional stamp duty is payable on those purchasing second homes and buy-to-lets. You can find out how much stamp duty you will have to pay using the stamp duty calculator on Moneyfacts.co.uk.
When was stamp duty introduced?
Often an unpopular tax, stamp duty has in fact been around for hundreds of years. It was first introduced in England in 1694 to help fund a war with France and over the years has been applied to a number of products and services including printed publications, insurance policies and even cheques. Although stamp duty is still payable in some specific circumstances, for example specified business transactions involving partnerships and on the purchase of shares, the most common form of stamp duty is now the Stamp Duty Land Tax which was first introduced in the late 1950s.
Will stamp duty be scrapped?
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Since it was first introduced, Stamp Duty Land Tax has become more expensive for property buyers and more complicated. As such, there are many within the property industry who are calling for the tax to be scrapped altogether. However, at a time when Government borrowing at record levels, it is unlikely that the Chancellor will be keen to scrap a tax that brings in a substantial amount of revenue. Instead, when looking at purchasing a property, home buyers need to factor in the cost of Stamp Duty when determining their house buying budget.
Derin Clark is an Online Reporter at moneyfacts.co.uk, the money comparison experts, specialising in personal finance.