How to avoid stamp duty on a house purchase and do first-time buyers pay it?
FOR first time buyers being able to avoid paying stamp duty on a house can be a helping hand to get on the property ladder.
So who can avoid stamp duty and how do you get around paying the tax?
What is stamp duty?
If you are buying a house in England or Northern Ireland you have to pay a tax on the cost of the property called stamp duty.
Stamp duty is a tax that only comes into affect if the house is worth over £125,000.
The amount of tax that you pay depends on how much money the property costs.
But there are some ways of getting around or paying a lower rate of stamp duty.
How much does stamp duty cost?
Calculating stamp duty can be quite complicated as their are several different tiers of tax that need to be added together.
For example, if this is not your first time buying a house, and you are purchasing a house for £300,000 you have to go through three different tiers of tax.
The tax is calculated like this:
On the first £125,000 of the cost of the house you pay 0 per cent tax.
The next £125,000 you pay 2 per cent tax which is £2,500.
On the final £50,000 you pay 5 per cent tax which is £2,500.
So in total you pay £5,000 stamp duty on a £300,000 property.
below is a table from with all the stamp duty rates.
You need to pay stamp duty within 30 days of purchasing your home, otherwise the government may charge you penalties and interest on top.
To pay your stamp duty you need fill in a SDLT return form, which available online .
Even if your home is worth under £125,000 and you don't pay any stamp duty you still need to fill in a SDLT form.
Do first time buyers have to pay stamp duty?
Thankfully, first time buyers don't have to pay stamp duty on properties valued up to £300,000.
This was announced in the Budget in November last year and was designed to help people get on the property ladder.
But estate agents claim that it has not been enough to boost the housing market.
A first time buyer is defined as someone who is purchasing their first property as a main residence and has never owned any other residential property in the UK or abroad.
If you are buying a house with someone else, both people buying the house have to be first time buyers to get the £300,000 tax free.
Although the £300,000 tax free is a big help, first time buyers will still have to pay stamp duty on the value of the property over that amount.
First time buyers pay five per cent tax on homes priced between £300,000 and £500,00, after that you pay the same stamp duty as if you bought a house before.
So if the house you are buying costs £500,000 you will pay not stamp duty on the first £300,000.
But you will have to pay five per cent stamp duty on the remaining £200,000, which works out at £10,000.
If you are unsure how to figure out how much stamp duty you will pay on a property that does the maths for you.
Here is our guide on how to calculate stamp duty and how stamp duty relief for first time buyers has affected housing market.
more on money
How does stamp work duty in Wales?
The Welsh government have their own system in place that functions just like stamp duty.
In Wales the equivalent of stamp duty is land transaction tax.
Land transaction tax has different rates to stamp duty, home buyers in Wales don't have to pay tax on the price of a property up to £180,000.
But, there is no help available with land transaction tax for first time buyers in Wales.
The average price for a first time buyer purchasing a house in Wales is £131,735, so most people buying a first home will not pay land transaction tax anyway.
Is there stamp duty in Scotland?
The Scottish equivalent of stamp duty is land and buildings transaction tax.
You only need to pay the tax if your house costs more than £145,000.
There is no extra help with land and buildings transaction tax for first time buyers but, the average price of a first house in Scotland is £120,824.
If you really want to lower your stamp duty, build don't buy.
This is a bit of an extreme option but it will save you a lot of money on stamp duty.
The same rates of stamp duty and their equivalents in Scotland and Wales apply if your are buying land rather than a house.
Buying a piece of land with planning consent to build a home is often a lot cheaper than buying a house.
You will also pay a reduced rate of stamp duty on the cost of the land.
Because of the difference in price between buying land and buying a house you will pay a lot less stamp duty on land than you would do on buying a house.
Obviously you need to be careful doing this as building a house from scratch can be and expensive and risky process.
But if your aim is to pay less stamp duty you could save a lot by building rather than buying.
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at [email protected] or call 0207 78 24516. Don't forget to join the for the latest bargains and money-saving advice.