Buying Houses and Stamp Duty – Know the Truth

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When you are looking at houses, stamp duty is one major consideration that you have to think about, especially before you make an offer on a piece of property. This can potentially be a large sum of money that is due at closing to the government, and as the buyer, you are the one who is responsible for it. Although your estate agent may tell you that there is no way of buying houses and avoiding stamp duty, there are actually several ways of doing so, and you may even be able to work out a deal where you get money back.

Where Did Stamp Duty Come From?

Stamp duty is one of those taxes that has evolved over the years to out of control proportions. Originally it was designed as a fee for the local government who made the sale of a home final. In other words, they stamped the paper that had the transaction on it, and you paid them for that service, or the stamp. Now, there is no stamp, and the purchase of a home is something that is simply taxed. This is not done in all countries, though in the United Kingdom, it is one of the costliest taxes around.

Ways to Avoid Stamp Duty

When you are looking at houses, these duties should be at the forefront of your thoughts, starting with the type of home that you are buying. One of the easiest ways to get out of paying stamp duty altogether is to buy a home that is “green” or environmentally friendly. The government highly supports green properties and will allow you to buy the home with either a reduced stamp duty or no duty at all. If you buy a home that is priced well above the norm (perhaps 500,000 GBP or more), you could end up with a rebate instead of a tax.

When it comes to other houses, stamp duty can also be reduced if you buy a home in a designated redevelopment area. These homes are located all over the country and are not always located in the worst parts of town. Some homes are new and some are old, but being able to get into a piece of property without having to pay this heavy tax, which can sometimes run as high as 5 per cent, is extremely important.

Finally, there are exemptions on houses whereby stamp dues can be eliminated altogether. For example, if you are a first-time home buyer (both spouses must each be first-time home buyers if buying the home as a couple), then you can be exempt from all duty, depending on the price of the home.

Know the Rules

The stamp duty threshold continues to change, and depending on where you live, it may be as high as 150,000 or 175,000 GBP, which means you should pay close attention to the price of the home if you are near either of those amounts. Just a small difference in price could end up with you paying an enormous amount of duty, so make sure that you know the rules.