From sales tax to income tax, taxes are a part of everyday life in the UK. But some taxes have been around a lot longer than others. The Stamp Duty Land Tax has existed in some form since the 1600s. Today, the government charges this tax for all transactions involving land in the UK. If you?re going to apply for a home loan to purchase a home, you?re going to pay SDLT. It?s that simple.
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Calculations
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The amount of tax you will be required to pay is on a scale based on the value of your property. In an effort to get the housing market moving, the government introduced a program to make home-buying more attractive to first-time buyers. Beginning in 2010, first-time buyers were able to enjoy a tax ?holiday? for a short time and were not required to pay the land tax for properties valued at under ?250,000. While the program was effective and led to an increase in mortgage lending, it was only a temporary break and it came to an end this year.
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New land tax rates were introduced and went into effect in March 2012. The taxes range from 0% for property valued at less than ?125,000 to a tax of 7% for properties valued at more than ?2 million.
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Payments
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The SDLT is due 30 days after the ?effective date? of your land transaction. The responsibility for completing the land transaction form and making the stamp duty payment falls on the buyer. Oftentimes, the solicitor will handle this for you but it?s important to look over the paperwork carefully before you sign on the dotted line and before it?s submitted. It?s also essential to turn in the paperwork and payment on time or you will end up facing additional interest, fees and charges.
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Relief
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Depending on the location and the type of property you purchase, you may be eligible for relief from this government land tax. For example, some areas that are deemed ?distressed? by the government can come with a tax break for your property. In addition, first owners of zero-carbon homes also can qualify for relief. Zero-carbon homes valued at less than ?500,000 have been given and exemption and those valued at over ?500,000 qualify for a discount.
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Minimizing Your Property Value
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If a property is priced just above the next tax level, some people try to work around the system and try to undervalue their home with the hope of paying a lower stamp duty. The government is wise to this ploy, however, and requires property owners to complete a fairly complex Land Transaction Return Form to ensure that the information is accurate and not artificially deflated.
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For more information about SDLT, payments or possible relief, you may check with HM Revenue and Customs.
Source: http://www.tomorrowfinance.com.au/blog/what-is-stamp-duty-and-how-is-it-calculated/
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