In
2001, the Government scrapped stamp duty on properties costing
up to £150,000 in the most disadvantaged areas.
It
hoped to stimulate residential sales in locations where many properties
were virtually unsellable.
In
his 2005 Budget, the then Chancellor, Gordon Brown, lifted the
threshold at which stamp duty became payable from £60,000
to £120,000. In 2006, he increased it to £125,000.
He
said he was doing it to help first-time buyers.
But,
with the average house now costing close to £185,000, and
the average first-time buyer taking on a mortgage of £130,000,
many people see this as too little, too late.
It’s
important to keep the stamp duty bands in mind
when you agree a purchase price for a property.
Buy
for £125,000 and there’s no tax due, but pay £125,001,
and you’ll face a bill for £1,250.01.
There’s
an even more painful jump if your property costs just above the
£250,000 barrier.
Pay
exactly £250,000, and you’ll be charged £2,500.
Pay £250,001 and this leaps £5,000 (and some loose
change) to £7,500.03.
When
the price of a property is just above the £125,000, £250,000
or £500,000 threshold, ‘apportioning’
is often used to push it back into a lower stamp duty bracket.
The
purchaser and seller agree a price that falls just below
the threshold, but the purchaser undertakes to pay an
additional sum for ‘fixtures and fittings’ –
which could include things like curtains, carpets or white goods
– taking the total price to a level the seller is happy
with.
But
be warned: Revenue & Customs checks a proportion of these
transactions and will challenge any that arouse its suspicions.
So
if you come to an apportioning deal, make sure you can prove the
sum involved was realistic – and that the transaction actually
took place – or the Revenue could come after you for unpaid
tax.
Remember,
tax evasion is a serious matter and in extreme cases can lead to
a prison sentence.
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If
the property you’re buying is in an area the Government
considers to be disadvantaged, it will be exempt from stamp duty
if it costs £150,000 or less.
Revenue
& Customs has an online database where you can check whether
any property you’re interested in qualifies for this exemption.
Click
on the link for a list of qualifying areas in each part of the
UK:
