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Understanding Stamp Duty in 2024: Essential Guidance for Mortgage Planning

Understanding Stamp Duty

On behalf of Mortgages Remortgages, Doncaster, UK

As a leading provider of fee-free mortgage advice in Doncaster, South Yorkshire, Mortgages Remortgages is committed to offering comprehensive guidance in understanding the Stamp Duty Land Tax (SDLT) and its implications for your mortgage in 2024.

Understanding Stamp Duty is important for anyone involved in property transactions, particularly those looking to buy a new residential property in the UK.

What is Stamp Duty Land Tax?

SDLT is a tax applicable to property purchases in England and Northern Ireland. Following the mini-budget announcement on September 23, 2022, the rates for SDLT have been set to remain unchanged until March 31, 2025​​. It’s important to be aware of these rates as they directly impact the total cost of your property purchase and, consequently, your mortgage calculations.

The amount of stamp duty paid could have a direct impact on your affordability to buy a property. The stamp duty rate is not only calculated on the property purchase price you are buying, but also on any other properties you may own.

photograph of a house

Stamp Duty Calculator

How much stamp duty will you have to pay?

Existing Stamp Duty Rates

  1. General Threshold: For a residential property, you will have to pay stamp duty tax on a property price over £250,000​​.

  2. First Time Buyer Relief: First-time buyers enjoy significant relief, with no Stamp Duty payable on properties up to £425,000, and a reduced rate on purchases up to £625,000​​.

  3. Rate Bands: SDLT is calculated based on specific price brackets. No SDLT is levied on properties up to £250,000. From £250,001 to £925,000, the rate is set at 5%. The next bracket, from £925,001 to £1.5 million, attracts a 10% rate, and any value over £1.5 million incurs a 12% tax rate​​.

  4. Additional Charges for Specific Buyers: There’s an added 3% surcharge for buy-to-let landlords. Additionally, overseas buyers face a 2% surcharge on top of the standard rates, resulting in foreign buyers of holiday homes or buy-to-let properties paying 5% more than UK nationals​​.

How Does Stamp Duty Affect Your Mortgage?

The SDLT payable can significantly influence your mortgage, particularly for first-time buyers or those purchasing high-value properties. It’s a critical cost element to consider in your mortgage budgeting as it adds to your upfront expenses.

You should speak to a mortgage advisor to find out exactly what you would be paying in stamp duty so you can plan your budget for your purchase.

Key Aspects to Consider

  • Filing and Payment Obligations: A 14-day window is available to file an SDLT return and settle any due taxes. Delays can lead to penalties and interest charges from HMRC​​.

  • Inclusion in Mortgage Calculations: When assessing your mortgage requirements, it’s imperative to include Stamp Duty costs to understand the full financial commitment you are undertaking.

  • Seeking Expert Advice: Given the complexities of Stamp Duty calculations, professional advice can be invaluable. At Mortgages Remortgages, we offer expert, cost-free mortgage advice, ensuring that you are well-informed and prepared.

Stamp Duty on Second Homes

In addition to the regular rates, you will have to pay an additional 3% in Stamp Duty if you are purchasing an additional property.

Properties purchased at £40,000 or more are subject to this higher rate.

Caravans, mobile homes, and houseboats are not covered by this.

choosing the right mortgage

Stamp Duty for a non-UK resident

For residential properties costing more than £40,000, non-UK residents may be required to pay an additional 2% stamp duty on top of the normal stamp duty rates when purchasing in England or Northern Ireland.

Claiming Back Higher Rates of Stamp Duty

You may be required to pay the higher rates of Stamp Duty since you will now own two properties if you purchase a new primary dwelling and your prior primary residence is not sold quickly enough.

However, you might be eligible to request for a refund of the higher SDLT rates you paid when you bought your new house if you sell your prior primary residence within three years of purchasing it.

Refunds for amounts over standard Stamp Duty rates are available if:

  • Within three years, you sell your former primary house, and

  • you make the reimbursement claim within a year following the sale of your former primary property, or within 12 months of the filing date of your SDLT tax return, whichever comes later.

How to Pay Stamp Duty

Although you can do it yourself, your solicitor will often take care of the Stamp Duty return and any outstanding payments for you.

In either case, it is your responsibility to ensure that everything is turned in on time.

Even if you won’t be required to pay any Stamp Duty, you still need to file a return (unless you are exempt).

Help to Buy Mortgage Advice Doncaster

Stamp Duty Exemptions

There are situations in which Stamp Duty may not be required. Here are a few possible examples:

In general, property transferred in accordance with a court order during a separation, divorce, or dissolution is exempt. A couple will be regarded as an unmarried pair for SDLT purposes if they decide to end their marriage without obtaining a court order.

Should no other consideration be given, property left under a will might not be liable to SDLT. In most cases, there is no need to notify HRMC in this situation.

If you give someone else your house as a gift, they won’t be responsible for paying SDLT on the market value of the asset as long as there isn’t an outstanding mortgage. If you assume all or a portion of an existing mortgage, you may be responsible for paying SDLT on the amount of the mortgage that exceeds the applicable SDLT level.

Understanding Stamp Duty Land Tax

Understanding Stamp Duty is a crucial aspect of property purchasing in the UK. Its impact on your mortgage and overall financial planning cannot be understated. With the rates set for the foreseeable future, it’s important to factor in these costs accurately.

If you require tailored advice or assistance, Mortgages Remortgages is here to provide expert guidance in the 2024 UK mortgage landscape, ensuring that you make informed and beneficial financial decisions.

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