Is Stamp Duty Payable on Exchange of Contracts or Completion
Stamp Duty: Payable on Exchange of Contracts or Completion?
If you`re a homebuyer in the UK, you may have heard of stamp duty. It`s a tax that`s payable to the government upon the purchase of a property. However, many people are confused about when stamp duty needs to be paid – on the exchange of contracts or upon completion of the sale. In this article, we`ll take a closer look at the stamp duty process and answer this important question.
What is Stamp Duty?
Stamp duty land tax (SDLT) is a tax paid to HM Revenue & Customs (HMRC) when you buy a property above a certain price in England, Wales, and Northern Ireland. The tax is calculated based on the purchase price of the property and is payable within 14 days of the transaction.
In Scotland, the equivalent tax is called the Land and Buildings Transaction Tax (LBTT). The tax rates and rules vary slightly, but the overall process is similar.
When is Stamp Duty Payable?
SDLT is payable on the completion of a property sale. Completion is the point where the buyer officially takes ownership of the property and the keys are handed over. This is when the sale process is complete, and the transfer of ownership is recorded by the Land Registry.
The amount of stamp duty payable depends on the purchase price of the property and whether the buyer is a first-time buyer or a buy-to-let landlord. There are different rates and exemptions available, so it`s important to check the current rates with HMRC or your solicitor.
Is Stamp Duty Payable on Exchange of Contracts?
No, stamp duty is not payable on the exchange of contracts. This is because the exchange of contracts is not the point at which the buyer takes ownership of the property. It`s a legal agreement between the buyer and seller to complete the sale at a later date. Until completion occurs, the buyer does not own the property and is not liable for stamp duty.
However, it`s worth noting that if the buyer fails to complete the sale after exchanging contracts, they may still be liable for stamp duty. This is because the exchange of contracts is a legally binding agreement to complete the sale, and the buyer has a legal obligation to complete the sale or face financial penalties.
In summary, stamp duty is payable on the completion of a property sale, not on the exchange of contracts. Completion is the point where the buyer takes ownership of the property, and the sale process is complete. If you`re a homebuyer, it`s important to understand the stamp duty process and the rates applicable to your purchase. Always seek professional advice from your solicitor or HMRC if you`re unsure about any aspect of stamp duty.