The election of new Prime Minister, Boris Johnson, could lead to changes in the way we pay for Stamp Duty Land Tax on properties bought in England and Wales.Boris Johnson has suggested that he would support scrapping stamp duty for homes worth less than £500,000 and look at switching stamp duty liability from the buyer to the seller.In this article, the experts at Farnworth Rose look at the current Stamp Duty Land Tax rules.

How does Stamp Duty Land Tax currently work?

Stamp Duty Land Tax is the tax paid on a residential property costing above £125,000.The buyer of the property must currently pay a percentage of the purchase price as Stamp Duty Land Tax.The full tax thresholds are:

• 0% on the first £125,000 of the property price

• 2% on the portion between £125,001 and £250,000

• 5% on the portion between £250,001 and £925,000

• 10% on the portion between £925,001 and £1.5 million

• 12% above £1.5 million

If you were to purchase a property valued at £400,000, you would have no tax applied to the first £125,000, 2% on the next £125.000 and 5% on the remaining £150,000. This would bring the total stamp duty bill to £10,000.

Does everyone pay Stamp Duty?

Since 2017, first-time buyers have been exempt from paying stamp duty on homes costing up to £300,000.For properties worth up to £500,000, first-time buyers will pay no stamp duty on the first £300,000 of the property price.To take our previous example of a £400,000 property, a first-time buyer will pay no stamp duty on the first £300,000 of the property and 5% on the remaining £100,000.This would bring the stamp duty bill to £5,000, half what they would have paid prior to the changes in 2017.

What if you are buying a second home?

For those purchasing a second home or an additional property, 3% of stamp duty will be added to the original tax thresholds.This would mean that a £400,000 second home or additional property would incur a stamp duty bill of £22,000, more than double the original stamp duty cost.For anyone who has a crossover between owning two properties, they will be required to pay the additional stamp duty. However, there is a 36 month grace period in which the additional costs can be reclaimed for overlap between two properties.

Budget for the full legal costs of moving home with Farnworth Rose

At Farnworth Rose, we understand that budgeting for your move can be difficult enough without keeping track of the latest tax changes.That is why we always provide a full conveyancing quote with a breakdown of the costs involved from legal fees to stamp duty charges.To get your conveyancing quote online, simply click the button below.Or, you can call our experts today on 01282 695 400.