Understanding Stamp Duty: Rules and Tips for Homeowners

Stamp Duty is one of the most significant costs to consider when buying a property. Whether you're considering a move or just staying informed, Giraffe Residential's guide will bring you up to speed on the latest rules & offer useful tips  when buying property.

What Is Stamp Duty and Why Is It Important?

Stamp Duty Land Tax (SDLT) is a tax that buyers pay on property or land purchases over a certain value in England and Northern Ireland. Scotland and Wales have separate taxes. This tax applies to both freehold and leasehold properties and includes cash and mortgage purchases. For most property buyers, Stamp Duty is an unavoidable cost, so knowing the rates and potential exemptions can save you money and ensure you're financially prepared.

Stamp Duty Updates from the Autumn Budget

In last Autumn's Budget, the Chancellor, Rachel Reeves, introduced some changes to Stamp Duty affecting additional property purchases and corporate investments. Here’s what homeowners and investors should know:

Increased Rates on Additional Dwellings - the government raised the Stamp Duty rate on second homes and buy-to-let properties from 3% to 5% above standard residential rates. This change is intended to moderate property investment purchases, potentially increasing availability for first-time buyers.

Higher Rate for Non-Natural Persons - purchases by companies or non-natural persons (corporations or trusts) of properties over £500,000 will now be taxed at 17%, an increase from the previous 15% rate. This adjustment applies to high-value properties acquired for investment purposes by corporations.

For those considering property investments or additional purchases, it’s important to consider these rates when calculating potential costs.

Stamp Duty rates are tiered, meaning that different portions of the property’s price are taxed at different rates. Here’s a basic breakdown:

Three Tips for Reducing Your Stamp Duty Bill

1. Consider First-Time Buyer Relief

If you’re purchasing your first property, confirm your eligibility for first-time buyer relief, which can reduce or eliminate your Stamp Duty liability for homes up to £250,000. This could save you thousands on a property for sale.

2. Look Into ‘Mixed-Use’ Properties

Mixed-use properties, such as homes with commercial elements, attract lower tax rates as they’re treated as “non-residential” for Stamp Duty purposes. If you're considering unique property types, speak with the team at Giraffe Residential, to find out if we have any properties that meet this category.

3. Consider Timing for Second Property Purchases

Buying an additional property incurs a 5% surcharge, but timing can affect this. If you’re selling a property within 36 months of purchasing another, you may qualify for a rebate on the surcharge. You can apply here.

Two Common Stamp Duty Myths

Myth 1: You Can Avoid Stamp Duty by "Gifting" the Property - Even if a property is "gifted," Stamp Duty may still apply unless it is gifted to a company. It’s essential to understand the rules to avoid any unexpected costs.

Myth 2: Stamp Duty Only Applies to High-Value Properties - Even though properties under £250,000 are exempt for standard buyers, Stamp Duty can still apply to additional properties or purchases over this threshold.

Calculating Stamp Duty for Your Property

Stamp Duty can be confusing due to its tiered structure. Fortunately, most estate agents, including Giraffe Residential, can help you with this.

What Next?

Whether you're a first-time buyer or an experienced property owner, it’s essential to stay informed about Stamp Duty changes.

At Giraffe Residential, we are committed to guiding you through each step of the buying process and helping you every step of the way.

Ready to make your next move?  Planning to buy or sell property in Wallsend Tyne and Wear? Contact Giraffe Residential today on 01912760550 or email hello@girafferesidential.com for personalised advice.