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You are here: Home / Archives for Stamp Duty

Dec 6

Why must I pay Stamp Duty to re-mortgage my property?

I own a property valued at £410,000.00 in my sole name.  I have recently married and am in the process of re-mortgaging my property to get a better deal.  To secure the best deal I need my wife’s salary to be taken into account by the Lender and I intend to transfer the property into our joint names as this will be a requirement of any mortgage in our joint names.  My existing mortgage is £295,000.00 and I am looking to borrow precisely the same amount from the new Lender.  I am astounded to find out that my Solicitors have advised that Stamp Duty will be payable on the transfer into our joint names, why is this?

Stamp Duty Land Tax is payable on any consideration payable for an interest in land.While no money is actually changing hands in this example, there is a substantial consideration being made by your new wife.

At the present time the property is in your sole name with your being solely liable for the existing mortgage. What is being proposed is that the new mortgage, albeit for the same amount, will be the responsibility of both of you and in respect of which the property is being transferred into your joint names.

In other words, your wife is receiving one half of your property in return for her becoming liable for one half of the mortgage debt (despite the fact that you will both be jointly and severally liable for the debt in any event).  In this instance there is effectively a consideration made by your wife of one half of the mortgage debt in return for her receiving a one half interest in your property.

Sadly, in your case, as your mortgage is substantial, one half of the mortgage debt amounts to £147,500,  which is in excess of the Stamp Duty threshold of £125,000 and, accordingly, a Stamp Duty charge of 1% of the consideration (£1,475.00) will be payable.

* Emyr Pierce is Managing Director of Emyr Pierce Solicitors in Rhiwbina, Cardiff, Western Mail Conveyancer of the Year, specialising in Domestic and Commercial Property. Contact www.emyrpierce.co.uk or email law@emyrpierce.co.uk

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Mar 31

Mortgage transfer sparks Stamp Duty Tax

I own a property valued at £410,000 in my sole name. I have recently married and am in the process of remortgaging my property to get a better deal. To secure the best deal I need my wife’s salary to be taken into account by the Lender and I intend to transfer the property into our joint names as this will be a requirement of any mortgage in our joint names. My existing mortgage is £295,000 and I am looking to borrow precisely the same amount from the new Lender. I am astounded to find out that my Solicitors have advised that Stamp Duty will be payable on the transfer into our joint names, why is this?

Stamp Duty Land Tax is payable on any consideration payable for an interest in land.
While no money is actually changing hands in this example, there is a substantial consideration being made by your new wife. At the present time the property is in your sole name with you being solely liable for the existing mortgage. What is being proposed is that the new mortgage, albeit for the same amount, will be the responsibility of both of you and in respect of which the property is being transferred into your joint names.

In other words, your wife is receiving one half of your property in return for her becoming liable for one half of the mortgage debt (despite the fact that you will both be jointly and severally liable for the debt in any event). In this instance there is effectively a consideration made by your wife of one half of the mortgage debt in return for her receiving a one half interest in your property.

Sadly, in your case, as your mortgage is substantial, one half of the mortgage debt amounts to £147,500, which is in excess of the Stamp Duty threshold of £125,000 and, accordingly, a Stamp Duty charge of 1% of the consideration (£1,475) will be payable

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Oct 22

Swapping homes will not save Stamp Duty

I have finally found a house I wish to buy, the owner of which is keen on buying my own property. If we do a “swap” will I make a substantial saving in Stamp Duty Land Tax?

Sadly the answer is no. It has been many years since the Inland Revenue introduced the rule in which Stamp Duty Land Tax (SDLT) is no longer payable on the “Equality of Exchange” being the term used for the difference between the two sale prices.

Previously, the former Stamp Duty was only payable on the Equality of Exchange, which made exchanges of properties between interested parties a cost-effective and attractive proposition.

When you consider the extent of revenue lost by the Inland Revenue to such transactions this is hardly surprising. A sale of a property at £400,000 would attract tax of £12,000 which, when swapped for a property worth £300,000, the duty of which is £9,000, would have previously resulted in no Stamp Duty payable and a saving of £21,000 as the “equality of exchange” of £100,000 would, of course, have been exempt from Stamp Duty Land Tax.

The current rule, therefore, is that Stamp Duty Land Tax is assessed separately on each property based on the two figures quoted.

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Oct 22

Fixtures and fittings may save Stamp Duty

I am interested in buying a property for £255,000 but am concerned about the stamp duty issue. Can I do anything to minimise stamp duty payable?

The price of £255,000.00 is just over the first stamp duty threshold where Stamp Duty Land Tax (SDLT) changes from 1% to 3%. In other words for the extra £5,000 it is costing you an extra 2% on the overall price.

One way around this is to agree a genuine apportionment of the purchase price as to, say £250,000 for the house and £5,000 for fixtures and fittings which are included in the sale. Please note, however, that this apportionment must be entirely genuine and realistic otherwise it amounts to a fraud of the Inland Revenue.

If you can justify the cost of fixtures and fittings to the tune of £5,000 – and there is no benefit to a seller in participating in any potential fraud – then you will pay £2,500 in Stamp Duty, rather than £7,650. That’s a saving of £5,150.

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Jul 18

Will part exchanging save me Stamp Duty?

I am hoping to part exchange my house for a new one. I have heard that this is a good way of saving stamp duty. Is this true?

Unfortunately it is not true. Some years ago Stamp Duty, as it was then, was only payable on the “Equality of Exchange”. This was the difference between the sale and the purchase prices and proved popular in the last recession when property developers were finding it difficult to sell new properties and the Stamp Duty savings were a popular attraction of part exchange schemes.

The new regulations governing Stamp Duty Land Tax (SDLT), as it is now, has removed this major benefit in the case of part exchange transactions. Stamp Duty Land Tax is payable on the value of the asset being acquired – regardless of whether it is being part exchanged for an existing asset.

Accordingly, SDLT will be payable on properties where the price exceeds £175,000.00 and not on the “Equality of Exchange” between the two part exchange values.

* Emyr Pierce is Managing Partner of Emyr Pierce Solicitors in Rhiwbina, Cardiff, Western Mail Conveyancer of the Year, specialising in Domestic and Commercial Property. Contact www.emyrpierce.co.uk or email law@emyrpierce.co.uk

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