Stamp duty is payable by most homebuyers apart from first time buyers purchasing a property for under £250,000. Stamp duty is a land tax that is levied on the transfer document itself and not the actual property. The stamp duty amount is calculated as a percentage of the property value that is being transferred to the new owner. Stamp duty rates start from zero percent for properties below £250,000 for first-time buyers or below £125,000 for everyone else. The next rate band is at £125,000 and increases to 1% up to £250,000 where the rate becomes 3%. The rate remains at 3% until £500,000 where it jumps to 4% and ends there.
Stamp Duty and Divorce
Divorce is a very stressful time for all those unlucky enough to experience it. Apart from the emotional turmoil there is the financial restructuring that may need to be done in cases where couples shared financial commitments, children and mortgages. When married couples divorce, unlike unmarried couples, the transfer of property does not lead to the party taking over the mortgage paying for the payment of stamp duty. The party buying out their former partner will not pay stamp duty on the transfer as it is considered to be part of the divorce settlement.
Many couples in the UK have claimed that they do not want to get married because of the financial implications in future and it could be that this attitude will cost them money if they do break up. Any unmarried couples that buy a house together in the UK before breaking up will be subject to stamp duty on the transfer of the mortgage from both parties to the remaining party.
New Higher Tax Brand
A new higher tax band will be introduced by the UK government in April 2011. Any properties purchased for £1 million pounds or above will incur an increased stamp duty rate of 5% to help pay for the first-time buyer exemption scheme. Many groups are outraged by this increase saying that the stamp duty land tax is an unfair taxing system not properly tiered like other types of tax. Other critics argue that increasing the stamp duty on houses over £1 million pounds will cause a rush of property purchases above £1 million before the new rate band kicks in. This, they say, is quite likely to be part of the governments plan.