Stamp duty on new builds

Stamp duty on second homes and buy-to-let properties

Stamp Duty on new builds

Stamp Duty for new build homes is similar to Stamp Duty for any home, whether it’s been built recently or not. Below we look at whether you’ll have to pay Stamp Duty if you’re purchasing a new build, how much you might have to pay, and whether the payment can be waived.

What is Stamp Duty payable on?

Stamp Duty Land Tax is a tax paid on property or land bought in England and Northern Ireland. You’ll have to pay it if your purchase costs over a certain price. However, following the outbreak of the coronavirus pandemic, the government introduced a temporary Stamp Duty holiday to help boost the housing market.

What this means is anyone completing a sale on a main property between 8 July 2020 and 31 March 2021 valued up to £500,000 will have no Stamp Duty to pay.

It has been confirmed that after the Stamp Duty holiday ends on 1 April 2021, rates and rules will return to what they were before 8 July 2020.

Stamp Duty rates

From 1 April 2021, you’ll have to resume paying Stamp Duty on portions of the price of your home above £125,000. This means that you won’t be taxed on the first £125,000, but will have to pay Stamp Duty for anything beyond that price.

 

Property value Stamp Duty rate
Up to £125,000 0%
The next £125,000 (from £125,001 to £250,000) 2%

The next £675,000 (from £250,001 to £925,000) 5%

The next £575,000 (from £925,001 to £1.5 million) 10%

The rest of the amount (over £1.5 million) 12%

 

The rules are slightly different if you’re a first-time buyer or if you’re buying a second home or buy to let property. There are also special rates for some other situations, such as:

  • property purchased by corporate bodies
  • if you’re purchasing six or more properties in one go
  • shared ownership homes
  • multiple purchases and transfers between the same seller and buyer
  • purchases that mean you own more than one property, and
  • residential property purchased by companies and trusts.

It’s important that you pay the Stamp Duty charges to prevent getting penalised. When you’re budgeting for a new home purchase, you’ll also want to consider other costs when buying a new home.

Do you have to pay Stamp Duty on a new home?

If you buy a new home between 8 July 2020 and 31 March 2021, you won’t have to pay Stamp Duty, There are some exceptions to this, however. Your new home must be your main residence – so not an additional holiday home or other extra property – and the Stamp Duty holiday only applies on the first £500,000 of a property. If your new home is more than that, you’ll pay tax on any value over the threshold.

Stamp Duty penalties: will I get fined for not paying Stamp Duty?

From 1 April 2021 (or for any properties valued over £500,000 between 8 July and 31 March 2021), you will be penalised for a late or missed Stamp Duty payment.

There are two main types of penalties: on submissions and payment. If you have to pay Stamp Duty on your new home, you’ll need to get HM Revenue and Customs (HMRC) to stamp your documents. This needs to happen within 30 days of when they’re signed and dated. The penalty for late submissions is as follows:

 

Lateness of submission Penalty amount
Up to 12 months 10% of the duty charge (maximum of £300)
12- 24 months 20% of the duty charge
More than 24 months 30% of the duty charge

 

If you’re late in paying your Stamp Duty fees, you’ll be charged interest on top of what you owe, unless the interest is less than £25. HMRC uses the interest rate set by HM Treasury to figure out how much you’ll owe.

Can Stamp Duty on my new house be waived?

There are circumstances where buyers could potentially get further relief or exemptions on Stamp Duty charges once the Stamp Duty holiday is over.

These include situations where:

  • no money is exchanged for a land or property transfer
  • property is left in a will
  • property is transferred because of divorce or dissolution of a civil partnership
  • you buy a freehold property for less than £40,000

The government website has a full list of situations where you can waive Stamp Duty Land Tax.

If you’re planning on applying for a mortgage to buy a new build home, you may want to check your Equifax Credit Report & Score beforehand – it’s free for the first 30 days and then £7.95 monthly. The report shows you your borrowing history, while the score gives you an indication on how creditworthy a lender may think you are.

This article was written on 23 September 2020; all information was correct at the time of writing.

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