Stamp Duty

Stamp duty and land tax is another of the additional costs paid when buying a property. The fees are as follows:

Up to £120,000 - nil

£120,001 to £250,000 - 1%

£250,001 to £500,000 - 3%

Over £500,000 - 5%

The rate thresholds were changed to the above in 2005 when the chancellor was put under pressure to raise the lowest threshold to help first time buyers get onto the property ladder.  

There are definitely issues with the above system. Currently if your house, for example, cost £499,999 you would pay 3% on that amount. If your house cost one pound more at £500,000 you would move into the next bracket and pay 5% on the whole value. Estate agents see this as too blunt a method of collecting tax and some people when buying there house do try to negotiate with the seller to find a way around this e.g. giving the seller ‘cash’ for the difference that therefore enables the buyer to fall in to the lower tax bracket.