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Posted by: Laura Liddell - Friday, October 27th, 2017
One of the costs related to purchasing a new property is Stamp Duty Land Tax – most commonly referred to as Stamp Duty. It’s non-negotiable, depending on the value of the property you are buying. If you don’t pay, or get it wrong, you face a fine from HMRC, as well as paying interest on the tax you owe. Before you commit to buying a property, it’s worth knowing what your liability will be so you can factor in the cost, and understand how to make sure it is paid on time.
Stamp Duty is a lump sum that anyone buying a property must pay, depending on the value of the property. It is payable on commercial property as well as residential property, but we’re focusing on residential transactions here. For reasons we’ll explain, it’s vital to ensure that Stamp Duty is dealt with promptly, as part of the conveyancing process.
When talking about residential conveyancing, Stamp Duty is due on any property sold for over £125,000. It is calculated according to the following bands:
Up to £125,000 0%
£125,001 – £250,000 2%
£250,001 – £925,000 5%
£925,001 – £1.5 million 10%
Above £1.5 million 12%
As an example, if you are buying your property for £437,000 you will pay 0% tax on the first £125,000, then 2% on the next £125,000 between £125,001 and £250,000, and then 5% on the next £186,999 (between £250,001 and £437,000).
0% on £125,000 0
2% on £125,000 (125,000-250,000) 2,500
5% of £187,000 (£250,000- £437,000) 9,350.00
As you can see, buying a property for more than £250,000 sees this property tax increases significantly.
You can check how much Stamp Duty will be as part of your moving costs using the HMRC’s online calculator so you can be sure you can afford your purchase.
Our residential conveyancing team at Dezrezlegal will give you an illustrative guide as to how much Stamp Duty you will have to pay as part of the work we will carry out preparing for the purchase of the property. However, we cannot give you specific tax advice, and it is your responsibility, as the buyer, to check the amount of Stamp Duty you will owe. You should take independent financial advice on the tax implications of your purchase, particularly if the purchase is part of a more complex tax situation – for example if you are purchasing a second home.
The HMRC require a Stamp Duty return and the payment to be sent to them within 30 days of the purchase completion. It’s usual to hand this over to your residential conveyancing team – but it’s also vital to remember that the ultimate responsibility for paying the taxman remains with you. Even if you don’t have to pay Stamp Duty because the property you bought is less than the £125,000 threshold, you may still have to file a return within 30 days.
If you don’t file your return and pay this property tax on time, you will still have to pay the full amount, along with a penalty and interest. This is the case even if your conveyancer made errors in the return or did not pay on time, and even if the money you set aside for Stamp Duty is still sitting in your conveyancer’s accounts. For this reason, it’s vital to make sure you choose a residential conveyancer you trust – ideally one with a proven process for ensuring the prompt payment of Stamp Duty.
This is a common area for complaint, and the Legal Services Ombudsman has dealt with an increasing number of cases where a solicitor has not paid Stamp Duty on behalf of its client. There are a number of reasons for this, from oversight, to deliberate wrongdoing – but for the client, the reason for the failure doesn’t really matter. They remain liable for the payment, for any penalty, and interest – and if the error hasn’t been discovered by HMRC for some years, this can be significant.
Serious as the failure to pay Stamp Duty is, you should not be alarmed by these stories – but make sure you choose a conveyancer you can trust to handle your purchase and complete the Stamp Duty transaction on time.
At Dezrezlegal, the payment of Stamp Duty is a process embedded into our internal systems to make sure it is paid on time, every time. We also have a dedicated post-completion team to ensure that any issues are dealt with promptly.
More generally, we can reassure our clients that we have stringently enforced separation between office and client accounts. We invite an external accountant to review our practices regularly, and on both occasions in that last 10 years when we have been audited by our regulator, we have exceeded their requirements in this area.
Payment of Stamp Duty is your responsibility as the buyer of the property. However, if you choose Dezrezlegal to complete your conveyancing, you can be assured that the relevant documentation will be filed, and the tax paid, on time, ensuring that your obligations are met.
Telephone: 0845 465 33 33