The costs of stamp duty land tax when buying a property can be high. This is a legal necessity and avoiding paying stamp duty is essentially tax evasion. There are, however, some ways that UK home buyers can minimise or reduce their commitments to stamp duty to save money in the home buying process. How can this work?
First Time Buyers Have a Two Year Stamp Duty Exemption
Those that are buying their first home can, from the March budget, benefit from an exemption of their stamp duty commitments if they buy a property for £250,000 or less. Those that look at buying at, or under, this limit can, therefore, avoid paying stamp duty land tax at all while the exemption is in place.
Use Stamp Duty Exemptions to Save Money in Land Tax
HMRC do allow some exemptions in stamp duty payments in certain circumstances. For example:
- Those that buy a property in an area that is designated as disadvantaged may qualify for Disadvantaged Areas Relief. This raises the lowest stamp duty tax threshold from £125,000 to £150,000.
- Those that buy a property that is zero carbon rated may qualify for complete stamp tax exemption if the property is worth £500,000 or less. Those at a higher value will be given a maximum discount of £15,000. This exemption only counts for properties purchased for the first time.
Those interested in learning more about official stamp duty exemptions can access HMRC’s relief guidelines online.
Other Ways to Pay Less Stamp Duty
Thinking about the cost of buying a property can have an impact on the stamp duty tax that will be charged. Other ways to reduce costs could include:
- Buy a property in a lower threshold: If an individual (not a first time buyer) buys a house worth £260,000 then they will have to pay £7,800 as the value will fall into the 3% tax rate. If they buy a property worth £250,000 they will only pay £2,500 as this is in the 1% tax rate.
- Negotiate with the seller: Those that are trying to buy a property that falls just over the edge of a stamp duty tax threshold could put in a lower offer and negotiate with the seller to try and nudge it down a band.
- Use fixtures and fittings: In some cases, where the difference between stamp duty bands is not that high, it may be possible to exclude a small number of fixtures and fittings from the home purchase price to drive it down a band.
Note that this last step needs to be done with care and ideally with advice from a solicitor. HMRC look for instances where buyers list an extremely high sum of fixtures and fittings as they know that this is a commonly used way to cut stamp duty costs.
Other solutions may also not work even though they look good on paper. Some buyers, for example, will offer to pay the property seller’s estate agency fees in order to price down the home. This is unlikely to get past the HMRC if they find out about it and could lead to a fine/bill for the outstanding stamp duty that is owed. For more information check this http://www.duquelaw.com/anaheim-personal-injury/.
Those that are in the process of buying a new home may want to check out the new stamp duty rates and thresholds so they know where they will stand. Investigating other ways to save on mortgage costs may help make additional savings.