Selling a house can be stressful. Delays, chain breaks, paperwork, fees, questions, worry, panic. It’s almost inevitable that all, or at least most of these will happen. And, even once you have a buyer locked in place, and you’ve found your new dream home, you still remain concerned that a hidden charge may make itself known or that some forgotten about legal fee may appear. One we often get asked about is stamp duty and whether it applies when you sell a house. This may sound a little odd, especially if you are a veteran of buying and selling property. For those selling their first home though, it’s a valid question. After all, if you’ve only ever been on the buying side of the transaction, you won’t really know what happening on the other side until you sell a home yourself!
In short though, no, you do not pay stamp duty when selling a house. Stamp duty, or SDLT is purely paid by those purchasing a property. Stamp duty can affect the sale of a house, more of which we will cover later.
What is stamp duty?
Stamp Duty Land Tax or SDLT is a form of tax paid when you buy a property. It is calculated based on the property value. First-time buyers are exempt from stamp duty on properties priced up to £425,000. For everyone else, stamp duty comes into effect on properties priced at £250,000 and above.
If you already own a home and purchase another, you will find that an extra 3% on top of the standard rate will normally be added. If you plan to sell your main residence yet have already bought a new home before the main property sells, you’ll need to pay the additional SDLT for multi home ownership but will be able to apply for a refund once the other home is sold. This refund must be applied for within 36 months of the sale.
Stamp duty is also a little different if you are not a UK resident, there will be an added 2% added to the SDLT charge on the property being purchased. To be classed as a UK resident, you must be in the UK for at least 183 days during the 12 months prior to your house purchase.
How does stamp duty affect selling your house?
Whilst it is not something the seller has to pay; stamp duty can still influence the sale of the property.
An interested buyer will have lots of costs to factor into their house purchase, and with stamp duty potentially adding several thousand pounds to the equation, it can be something that detracts them from making an offer.
This could mean that they look to make a lower offer on the home, or it could mean they choose not to make an offer at all. This then puts you in that awkward situation of reassessing your asking price and seeing if it encourages offers, or sticking with it and hoping people are willing to cover the costs.
In most cases, interested buyers will be fully aware of the potential stamp duty but some see that lowering their offer a little could save them thousands on both the house price and the SDLT.
What taxes do I pay when selling my house?
So, with no stamp duty to pay when you sell a house, you could find yourself needing to pay the tax man in other ways. If you are selling a property that you inherited, you may find yourself liable for Capital Gains Tax. This is a tax calculated on the gain you make when you sell property that is not your home.
When it comes to selling your home, CGT will not be payable if all of the following apply:
- You have not let part of the home out.
- You did not buy the property just to make a gain.
- The grounds are less than 5,000 square metres.
- You have one home and have lived in it as your main home for all the time you have owned it.
- You do not have one part of your home exclusively for business purposes. Working from home occasionally doesn’t count as exclusive business use.
However, if any of these do apply, a tax will be due.
Stamp duty will not apply to you when selling your home, but it is worth factoring in the potential stamp duty charges for the buyer. These could run high and could easily be a factor that deters a buyer from making an offer.
If you are selling a house, or even looking to buy, speak to Cairds. We are the leading independent estate agents in Epsom who can assist you every step of the way with completing a house purchase or sale. With a wide range of properties for sale in Epsom and throughout Surrey, we can cater for all tastes and budgets. Should buying not yet be on the agenda, our experienced team can also help you with renting in Epsom and Ashtead too. Simply give us a call with your property queries and we will be more than happy to get your property journey started.