If you are about to embark on a search for a new home, you may be keen to learn how to avoid stamp duty. This is a tax that must be paid upon the sale of any residential or commercial building in the UK, with just a few exceptions.
There are some buyers who are not affected by the rules, but the majority will be and it is vital that stamp duty land tax (SDLT) is kept in mind when looking for a home or business premises to purchase, as it likely this will add a significant sum to your final bill. Indeed, it could even see that particular address being pushed out of your price range.
So how exactly does it work? In England and Wales, you do not have to pay this levy if the residential property you are buying is sold for less than £125,000; however, over and above this sum you may have to fork out a substantial amount, on top of what you are spending on the house or flat.
For instance, homes sold for between £125,000 and £250,000 are subject to a one per cent SDLT charge, those purchased for between £250,000 and £500,000 have a three per cent charge attached and if you pay between £500,000 and £1 million you can expect to fork out four per cent in duty. Anything above £1 million is liable for a five per cent charge.
This means that the more you pay for a house or apartment, the more you will need to spend on SDLT. Not only could this push up your total bill significantly, but it may also mean that you are unable to afford a property you thought was within your budget.
Luckily, there may be a stamp duty loophole available to you that is completely legal and would not be classed as tax avoidance.
The first is a rule that applies only to first-time buyers in England and Wales. Until March 2024, such consumers are not required to pay SDLT if the residential property they are buying costs less than £250,000. This is well above the £125,000 cut-off point for the rest of the population.
In order to qualify, every person purchasing the home must be a first-time buyer and the saving they might enjoy as a result could be substantial.
However, what do you do if this is not your initial rung of the housing ladder? There is another option available to you that could see you reducing your outgoings.
To try and encourage investment and regeneration of disadvantaged areas, the government has raised the stamp duty threshold in such postcodes to £150,000 – £25,000 more than elsewhere in the country. So, if you specifically look for a property within one of these parts of England or Wales, you could buy a more valuable house without having to pay a higher tax as a result.
Should the building you have your eye on cost more than this or not sit within an acknowledged disadvantaged area, you might want to consider stamp duty mitigation as an alternative way of avoiding the levy.
Such schemes make use of the knowledge of qualified tax planners or solicitors, who will be able to provide you with the information you require to lower the amount of SDLT you are charged – sometimes by as much as 100 per cent.
As you can see, there are many ways to legally lower your stamp duty commitments – why not find out more about your options today?
