Stamp Duty Tax: What is it and why do I need to pay it?
With Stamp Duty Tax being a hot topic of debate, we felt that it would be a good idea to dedicate a blog to explain what is it, and why buyers of a property need to pay it.
What is it?
Stamp Duty (also known as Stamp Duty Land Tax in England & Northern Ireland) is a mandatory tax that most people buying a property or land will need to pay after completion of the sale. This is once all the housing contracts are signed and the keys are handed over.
The tax only applies to properties costing over £125,000, although there are exemptions and discounts under certain circumstances such as being a first-time buyer (see ‘Rates on your first home’). The amount of tax a buyer pays also varies depending on the selling price of the property and its type (e.g. residential or commercial). The government issued Stamp Duty Land Tax Calculator can help you find out exactly how much you will need to pay.
Why do I need to pay it?
To be granted your Certificate of Land Ownership from the HMRC, you must show your stamp duty tax receipt paid in full. This essentially means that to be the legal owner of the land, the tax must be paid.
It is unfortunately not a payment which can be avoided as it is enforced by the HMRC, so be prepared beforehand when purchasing a property that you are able to cover the payment in full. Due to being mandatory, it may help to view this as a payment which forms part of the whole buying process, instead of being an additional fee upon purchase.
How do I pay it?
To pay the Stamp Duty on your newly acquired property, you should find your 11-digit unique transaction reference number (UTRN) either on your online submission receipt or paper stamp duty return. Once you have this, contact your bank for this to be payed to HMRC.
It’s important to remember that Stamp Duty Tax must be payed within 14 days of the completion of the sale. It’s likely that your solicitor will assist in paying the Stamp Duty within this period, it is important to pay within this period as you may be fined and/or have interest added. Remember: it can take around three working days for the transaction to be complete, so take this into account when paying within the deadline.
We hope this has helped you to understand Stamp Duty Tax.
If you are looking to sell your home or need general property advice, do feel free to get in touch with us here.