Property Tax and How To Budget For Stamp Duty​

If you already own a residential property, you’ll be hit a little harder with your SDLT charge, to the tune of an extra 3% on top. That means second homes, holiday homes and buy-to-let properties will all land you with extra Stamp Duty to pay. If you’re living in Scotland or Wales, that extra charge bumps up to 4% instead.

The timing can be pretty important here. If your main residence is already sold by the time you buy a new one to replace it, you won’t get lumped with the extra SDLT charge. If you still haven’t sold your main home by the time you complete the purchase of your new one, though, you’ll technically own both properties at the same time. That means the extra 3% (or 4% in Scotland or Wales) will apply. However, there’s a wrinkle in the rules that could still save you money. If you manage to sell your old place within 36 months after buying your new one, you can claim a refund of the 3% charge you had to pay. There are a few other situations that can earn you that same refund, but they’re few and far between.

Another key question is whether or not you count as a UK resident for tax purposes. This can sometimes get tricky, but a lot depends on how much time you spend in the UK. If you’re abroad for at least 183 days of the 12 months before you buy a property, you won’t count as a UK resident for SDLT. In that case, you’ll generally be charged a 2% surcharge when you buy a residential property in England of Northern Ireland.

Stamp Duty’s a cost that’s all too easy to overlook when you’re sorting out your finances to buy property. Your mortgage lender, for instance, won’t step in to offer extra cash to cover it. This means you’ll have to make your own arrangements, setting aside what you’ll need in advance. While you’re at it, think about the other “hidden” costs of buying a home. Solicitor’s fees, removal bills and so on all need to be taken care of and budgeted for.

Working out beforehand what you’ll end up paying is absolutely essential here, to avoid some very nasty surprises down the line. You should also put some thought into what you could do to bring some of those costs down. As we’ve already discussed, buying a house that’s worth less than £300,000 as a first-timer means you won’t get lumbered with any Stamp Duty. Beyond that, you could potentially reduce your up-front deposit to help cover your SDLT charge – although you’d probably find it harder to get a good rate from a lender that way. A better approach in general would be to think of Stamp Duty as if it were an extra lump to pay alongside your deposit so you can work it into your budgeting from the start.

As for the budgeting itself, there are some basic strategies that can pay off pretty reliably. In fact, you should probably be using some of them anyway, just to keep control over your everyday finances. Bringing down any rent you’re paying can be a big help - perhaps by moving to a cheaper place while you save up a deposit, for instance.

As for basic money management, we’ve talked about the 50/30/20 rule and zero-based budgeting in a few of our other articles, and they’re definitely worth putting into action when you’re planning to buy property. You could also check out our guide, “Easy Ways to Save for a House on a Low Income”, which covers several other options you might want to consider.

Keep checking back here for more money tips and updates. We’re experts at saving you cash and we’re always here to help. That’s the reason why you’re better off with RIFT.