Departments

Stamp Duty - How it affects you

Most people who are in the process of buying a property will already have heard the dreaded phrase 'Stamp Duty'

This means that if you buying a property where the price is over £125,000 then Stamp Duty Land Tax is payable on your behalf by Coupe Bradbury to the Inland Revenue. This applies whether you are buying your own home or business premises.

Shortly before completion of your purchase we will prepare the Stamp Duty Land Transaction return and you will be asked to sign this. We cannot do this for you but will guide you through completion of the form

We will then send it to the Inland Revenue together with the Stamp Duty payable and a formal certificate by way of receipt is then issued by the Inland Revenue. It is only when this receipt is received by us that we can proceed with registration of your purchase at HM Land Registry.

This means that now we will need additional information from you, such as your National Insurance number. Whilst we deal with the payment of any duty and complete all necessary paperwork the Inland Revenue now place the responsibility for the payment of the Land Tax upon you as the buyer.

We will also help you to deal with the new issues arising out of the apportionment of the purchase price. The Inland Revenue will wish to know if the price has been divided between the cost of the property and the furnishings / furniture.

Whether it is called Stamp Duty or Stamp Duty Land tax the effect remains the same. On completion of a purchase of a property you may be required to pay duty to the Inland Revenue.

There are other regulations which will be in place specifically for commercial property and we will advise you on these if you are buying commercial premises.

For residential property the rates of Stamp Duty Land tax are:

• £1 to £125,000 = no duty is payable 
• £125,001 to £250,000 = 1% of the purchase price 
• £250,001 to £500,000 = 3% of the purchase price 
• £500,001 upwards = 4% of the purchase price

If a property falls within a 'disadvantaged area' whereby stamp duty land tax would not usually be paid this will only apply between the prices of £125,000 and £150,000. If your purchase price is higher than £150,000 stamp duty at the above percentages will still be payable even in a qualifying area.

Right to Buy - Buyers Be Aware!!

Many Council Tenants are now entitled to buy their Council owned property under the 'Right to Buy' Scheme. This is a good choice for people who would not otherwise be able to afford their own home.

However, buyers should be aware that if they are having a Mortgage to assist in the purchase and intend borrowing an amount higher than the purchase price being paid to the Local Authority, then the Local Authority will want to know why.

You may want to spend money on your home once you own the same upgrading, extending or modernising it. Buyers need to be aware that the Local Authority will want to know what the additional funds that you are borrowing above the purchase price are for. Once your mortgage application has been sent to the Lender it is worth obtaining estimates for the work you intend doing to the property. We will ask for these estimates which we will need to submit to your mortgage lender once an offer of mortgage has been received.

By way of an example:

Your property may have been valued at £60,000. You are paying £30,000 with a £30,000 discount from the Local Authority. You apply for a mortgage of £40,000 as you intend to spend £10,000 on upgrading the property. We will ask you for estimates for the work showing that you will need the £10,000 for the upgrade to your home. We will send these estimates along with a copy of your mortgage offer to the Local Authority through their solicitors for approval.

Why do we need to do this?

When you purchase from a Local Authority with the benefit of a discount, the Local Authority are entitled to ask for this to be repaid to them for a period of three years after your purchase. The amount of the discount to be repaid will reduce by one-third for each complete year after your purchase. A note of this right of repayment to the Local Authority will be made on the registered title to the property. If you are purchasing with the assistance of a mortgage the lender will want to be registered as having the first interest in your property should the property ever be sold. This means that the Local Authority are asked to postpone their interest in the proceeds of sale behind those of the mortgage lender. Where you are borrowing more than the price being paid, there is then less equity remaining in the property if it were to be sold within the three year period following your purchase. Properties can reduce in value as well as increase. The amount remaining on a sale after payment of the mortgage will depend upon the amount of discount allowed when you purchased.

We will advise you on all these matters and how they affect you. You will not need to worry about them.

By producing the estimates at an early stage it will save you worry and frustration later, save you considerable time and help to complete the purchase quickly.

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