Stamp Duty

Gordon Brown Loves You

In 1997 Stamp Duty raised £2.5bn for the governments coffers, currently, that's running at something like £9bn per year. It doesn't take a lot of thought then to realise that the government is very happy with strongly rising house prices, and a vibrant housing market. 

Stamp Duty is a Tax on property purchase. Introduced in the UK in 1694, from 1993 to 2005 the starting point for applying stamp duty was £60,000. If you bought a property for £60,000 stamp duty was zero, if you bought a house for £60,001 it was 1% or £605 - it's rounded up the the nearest £5 !

Recently the starting point for stamp duty was raised to £120,000, which means you can now purchase a property for £120,000 and escape stamp duty, whilst a purchase at £120,001 will incur stamp duty of £1,205. 

If you buy a more expensive property, from £250,001 to £500,000, you'll be landed with a stamp duty bill of 3% of the purchase price. Stray over £500,000 and you can look forward to paying 4% of the purchase price to Gordon, for ... nothing.

Your Solicitor or Conveyancer will collect the stamp duty from you, at exchange of contracts, or completion, and pass it on to the the tax people.

Because of the abrupt changes in duty, particulary from £250,000 (£2,500 duty) to £250,001 (£7,500 duty) you will not see many sales agreed for £251,000.

It has been common practice, around the £250,000 price band, to agree a sale of £250,000 and a seperate sale of fixtures and fittings, usually carpets, for say £10,000. In this way a property can be sold above the 3% threshold, whilst only incurring 1% stamp duty.

I'ts rumoured that Gordon is not happy with this, and will be checking up on the practice - you have been warned.