When an individual buys a property in the UK, he or she has to pay a certain percentage of the total value of the property as tax, which is known as the Stamp Duty Land Tax. Essentially, the burden of paying the stamp duty is on the buyer, which can further increase the cost of investment. Usually, the SDLT has to be filed within 14 days of the purchase and paid within that time limit. If the stamp duty is not filed or not paid on time, HM Revenue and Customs can charge interest and levy penalties. But, there is one question in every buyer’s mind – should sellers need to pay stamp duty on property sales? This is what estate agents in Rainham have to say about that.
Should sellers need to pay stamp duty?
The UK government is always looking to create more efficient-tax reforms. In 2019, UK chancellor Sajid Javid announced that he was looking to make a major change to stamp duty, which led many to believe that the burden of paying the stamp duty tax might be shifted from buyers to sellers. Of course, this rumour was quickly rejected. However, that got everyone thinking, should sellers pay the stamp duty? As per the current system, buyers pay stamp duty on their purchase and that stamp duty is paid to the HM Revenue and Customs department. Moving forward, when that seller purchases a new property, he or she pays the stamp duty on that purchase. Keeping that cycle in mind, it would be unfair and almost chaotic to shift the burden of stamp duty from the buyer to the seller.
Sellers are required to pay capital gains tax when they dispose of their property. Essentially, capital gains tax is like a fee that you pay on the profit you make when you sell an asset. The sale price of the property minus the original cost of the property is what you make as profit, on which you have to pay a percentage of tax which is the capital gains tax. This tax is obviously paid by the sellers. Also, there are some cases where sellers are selling their property in order to downsize, to save for retirement or maybe if the owner is making a distress sale. Hence, it would be unfair to burden the seller with a stamp duty tax.
What happened to stamp duty in 2020?
In the second half of 2020, the stamp duty holiday was the most talked-about government scheme. Basically, in order to boost the buyer’s confidence, increase activity in the housing market and help the property recover from its temporary lull, the UK government announced a stamp duty holiday. The stamp duty holiday was a temporary suspension of the stamp duty that is levied on the purchase of property. Initially, when the stamp duty holiday was introduced in July 2020, it was supposed to end in March 2021. However, upon seeing the immense success of the stamp duty holiday, the UK government decided to further extend the scheme until June 2021, after which it was again extended till September 2021.
What is the current stamp duty land tax?
As of October 2021, a buyer who is purchasing a property that is valued under £125,000 does not have to pay any stamp duty. Buyers who are investing in a property between £125,001 – £250,000 will have to pay 2 percent of the total value as stamp duty tax while buyers who are purchasing properties between £250,001 – £925,000 will have to pay 5 per cent as SDLT. For properties that are valued between £925,001 – £1,500,000, the stamp duty is 10 percent of the total value whereas, for properties over £1,500,000, a 12 per cent stamp duty tax is levied. If an individual is buying an additional property, which means the individual already has one property on their name at the time, then an additional 3 percent is charged. And, for overseas buyers who are not UK residents, an additional 2 per cent is added to the stamp duty tax.
Can stamp duty be refunded?
If you have already purchased a new property but you have not been able to sell your existing home in the meantime, you will have to pay a higher stamp duty tax as you have more than 1 property registered to your name. However, if you do manage to sell your home within 3 years of buying your new home, then you can apply for an SDLT refund. Keep in mind, the refund that you will get will only be for the additional 3 percent that you paid at the time.
When is stamp duty not payable?
For one, if a property is transferred to you as a gift, then no stamp duty tax is applicable. Secondly, if you manage to strike a deal with the seller and bring down the price, you might have to pay a lesser percentage of stamp duty, depending on the price bracket.