There are many costs associated with buying a home, with stamp duty adding a significant amount to the final price. Here are some ways to mitigate some of your stamp duty costs.
written by guest writer Liam Cogan
Unless you’re a first-time buyer, you are going to have to pay Stamp Duty when you purchase a home or land. It is worth mentioning that the law is different in Scotland and Wales but the same in Northern Ireland.
The amount that you need to pay can vary, and can add up to tens of thousands of pounds. There are, however, ways to buy a home that can lessen the amount of tax you need to pay.
How is stamp duty calculated?
The amount you pay on Stamp Duty depends on three main factors.
- How much are you buying the property for? Stamp duty is calculated as a percentage of your buying price.
- Are you a first-time buyer? Or is the person you’re buying with a first-time buyer?
- Is this a second home? Or are you a landlord?
Here are the steps you can take to lower the amount of stamp duty you will have to pay.
Negotiate the buying price
It stands to reason that the lower your purchase price, the lower the Stamp Duty will be, as it is calculated as a percentage. So an obvious way to lower your stamp duty paid is to focus on negotiations when buying your home.
For readers in the North of England (where properties are significantly cheaper) you may not have to worry about Stamp Duty at all, as there is no Stamp Duty on properties costing less than £125k.
After that, it’s better to use this guide to for the exact percentages you’ll be charged depending on property price. [try and find a different link which isn’t behind a paywall – eg stamp duty calculator] https://www.stampdutycalculator.org.uk/
This is why it’s so important to haggle down the purchase price as low as possible. Along with, just saving money in general of course.
Transferring a Property
Another option, though it depends largely on personal circumstances, is the transfer of a property.
If a property is passed down and gifted to you through a will, the property would not have been bought or sold to you and you would not be liable for Stamp Duty (though you would be subject to inheritance tax, but that’s another subject.)
This can also apply to a divorce. If you are moving out of a family home that was bought between you and your spouse, and one of you wants to buy the other out, Stamp Duty would not apply.
Claim it Back
One way you can save on Stamp Duty is by claiming it back.
For example, if you sell your main residence within three years of completing on a new home you’re eligible for a 3% refund on the surcharge.
To give context, if you bought a second home for a price of £400,000, the below Stamp Duty charges would apply:
- On the first £125,000 = £3,750 (no stamp duty but 3% surcharge)
- 125,000 to £250,000 = £6,250 (2% stamp duty and 3% surcharge)
- £250,000 to £400,000 = £12,000 (5% stamp duty and 3% surcharge on the final £150,000)
- Total Stamp Duty = £22,000
If you’re in a position to be able to make multiple purchases simultaneously, you can also divide the cost of the Stamp Duty across the number of properties. This is called multiple dwelling relief. Find more about it here.
Buy a Plot of Land and Build Your Own
Here at Unboxed Homes, we specialise in designing and then building your own eco friendly home.
At our custom build development Green Oaks, you are buying land with planning permission to build a home, and then contracting us to build the home for you, so you only pay stamp duty on the land rather than the value of the built property, which will save you thousands of pounds.
So, for example, if a nice house in the local area costs in the region of £700,000, you will pay £25,000 if you do not own another home or £46,000 if you do. However, if you buy the plot and then build your own home – you could be paying approximately £260,000 for the plot (including foundations) and will then pay nothing if you are a first time buyer, £3,000 if you are moving home or £10,800 if you own another home.
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