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Stamp Duty Guide

Buying a home is a large endeavor and requires careful planning and budgeting. One added expense that few think to consider when purchasing a home is the dreaded Stamp Duty. This tax is a percentage paid on the price of the purchase of the home.

The Numbers
            Depending on the price you pay for your home you are liable to pay a certain percentage. Here is the current rate at which the Stamp Duty is calculated:

 

 

 

Cost of Home Percentage of Stamp Duty Cost of Stamp Duty Total Cost of Home

Less than £125,000

0%

0

Less than £125,000

£125,001-£250,000

1%

£1,250-£2,500

£126,251-£252,500

£250,001-£500,000

3%

£7,500-£15,000

£257,501-£515,000

£500,001 or more

4%

£20,000 or more

£520,001 or more

 
            As you can plainly see this tax can make a home significantly more expensive than its original purchase price. There are many other fees and expenses when applying for a mortgage and buying a property.

Avoiding Stamp Duty
Since it is up to the purchaser to accurately calculate the tax and pay it to the corresponding office many people have been trying to find ways around paying such a hefty sum. There some effective and legal ways and there are some not so smart and illegal ways.
Some have tried to evade paying the stamp duty tax by falsifying the actual purchase price of the home by listing fixtures and fittings as a separate purchase in effect lowering the value of the home below the stamp duty threshold. Doing this could result in punishment of additional fees beyond what you would pay for the original stamp duty tax as well as legal ramifications. This form of avoiding the stamp duty tax is not, I repeat, NOT advised.
            Now, if you are in a situation where you are purchasing a home and the price asked is near to a price for a lower stamp duty percentage, speak to the seller of the home with all sincerity and kindly explain that if they lowered the price minimally it would result in much less expense for you. If the seller is really in the market to sell their home, they should be more than willing to oblige.

Recent Changes
Due to the credit crunch, it was announced that for a year from early September 2008, that the exemption of the stamp duty land tax will be raised from properties worth £125,000 and under to properties worth £175,000 and under in an attempt to help homeowners buying their first home.
            Also, a new more complex form has been created instead of the Particulars Delivered form used in the past. This new form was created to help with the problem of payees falsifying documents. The new form is six pages long and has seventy questions. With these forms, purchasers no longer have to provide details of the purchase to the Stamp Office. Instead, they only sign a Land Transaction Return form which has already been completed by their solicitor, or licensed conveyancer. The Land Registry will not register ownership to the homebuyer until it receives a certificate from the Inland Revenue confirming this new form has been filled out.
           
            For more information and help with understanding the Stamp Duty go to:
http://www.thetaxguide.co.uk/StampDutyCategory.html

 
     
 
 
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