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Stamp Duty: Can I Get a Reduction?

By: Louise Smith, barrister - Updated: 8 Feb 2013 | comments*Discuss
Stamp Duty Property Sold Transaction

Stamp Duty - or Stamp Duty Land Tax as it is officially known - is a tax that generally has to be paid when a property is sold. The amount of tax that has to be paid is calculated as a proportion of the value of the property and may vary according to a number of factors. In most cases a Stamp Duty Land Tax return will have to be sent to HM Revenue & Customs within a fixed time limit after the sale of the property - even in cases where no Stamp Duty is payable.

In recent years there have been a number of changes made to the Stamp Duty payment requirements. The article below looks at circumstances in which a reduction in Stamp Duty may apply in relation to the sale of residential properties.

Changes to the Stamp Duty Thresholds

Until September 2008 Stamp Duty was paid on the sale of most properties which sold for £125,000 or more. As the majority of properties in the UK sell for more than this, the threshold was raised to £175,000 for a fixed period, to stimulate the housing market. From 1 January 2010 the threshold went back down to £125,000 (£150,00 if your property is in a designated disadvantaged area).

The Amount on Which Stamp Duty is Calculated

The amount on which Stamp Duty, for a residential property, is calculated is usually the market value of the property. In most cases this is likely to be the sale price. (Different rules may apply to commercial or mixed use properties.) This amount includes the price of the property plus any additional figure paid for fixtures and fittings. However, if something is paid on top of that in relation to any extras, such as an item of furniture, which are being included in the sale this may not form part of the value which applies for Stamp Duty purposes.

Homes Bought by a Property Developer

In some cases where a property developer buys a person’s existing home in return for that person buying a new property from the developer, Stamp Duty may not have to be paid on the sale of the existing home. However, for the transaction to be exempt from Stamp Duty it must have been the individual’s main home for at least two years and the new property must also be intended as their main home. In addition, any land that comes with the old home must not exceed a certain size. If the land exceeds the specified limits, Stamp Duty may be payable on part of the transaction price.

Zero Carbon Stamp Duty Relief

No Stamp Duty is payable on new “Zero Carbon” homes which cost up to £500,000. For Zero Carbon homes costing more than £500,000 a reduction in the Stamp Duty which would normally be paid may be available. In order to qualify as a Zero Carbon home, the property will have to be certified as such by a qualified assessor who will confirm that it meets the stringent renewable energy and efficiency criteria required.

Stamp Duty and the Right to Buy

Many local authority tenants may have the right to buy their council property at a discounted price. This may be substantially lower than the full market value of the property. The contract for the sale of the property will stipulate that, if the property is sold on within an initial fixed period, a (decreasing) percentage of the difference between the market value and the price paid must be paid back to the local authority. When a tenant exercises their right to buy, Stamp Duty is generally calculated by reference to the lower, discounted price rather than the actual market value of the property.

Stamp Duty and Shared Ownership

In some circumstances people purchasing a shared ownership property may be eligible to defer payment of part of the Stamp Duty applicable to the transaction. To qualify the purchase will have to satisfy certain criteria – for example the vendor will generally be an approved housing association or local authority. If all criteria are met the buyer may have the option to pay only the Stamp Duty on the value of their initial purchase. The remaining Stamp Duty may not have to be paid until such time as the buyer owns 80% of the property. Alternatively the buyer can opt to pay all of the Stamp Duty due on the full market value of the property at the outset.

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