What does the increase in the Stamp Duty Land Tax mean for our million pound property?

Our lawyer Fiona McNulty discusses the rates of Stamp Duty Land tax
Legal cartoon
© Merrily Harpur (harpur.org)
Question: We have offered £1.2million for a house. The agents have said that we need to buy the property before April 6 otherwise we will have to pay Stamp Duty Land Tax at the rate of five per cent instead of the current rate of four per cent. Is the rate really going up to five per cent, and will it only be on the amount above £1million?

Answer: As a general rule Stamp Duty Land Tax is payable on the transfer or purchase of residential property or land in the UK subject to certain exceptions and rules.

It is payable on what is known as the "chargeable consideration", which is the purchase price of the property excluding any fixtures and fittings such as carpets and curtains.

There are many rules governing the amount payable. In practice it is a percentage of the purchase price. There is no Stamp Duty payable on properties where the purchase price is less than £125,000. Properties costing between £125,000 and £250,000 are liable to one per cent Stamp Duty, and the rate on those costing more than £250,000 to £500,000 is three per cent.

From April 6, the rate on residential property will increase from four per cent to five per cent for properties or land where the purchase price is more than £1million. The amount payable will be five per cent of the purchase price not five per cent of the value of the property which exceeds £1million.

Accordingly, the Stamp Duty that you will have to pay after April 6, on a purchase price of £1.2 million, will be £60,000 (four per cent would be £48,000).

Follow us on Twitter @HomesProperty and Facebook