New house under 120,000 - why did I have to pay out stamp duty?

Bossyboots

Fair enough. Where I live though we only have small high street firms who wouldn't be able to absorb the costs of giving free advice interviews.

Perhaps the moral therefore is to try and find a large firm with the resources to give free advice before committing any more money to paying for it.

ChrisB_4

It's not so simple...

The 120k limit as said by Gordon Brown (......xxxx....expletive).. is actually not including leasehold on the property. Now, I don't profess to be an expert, but my solictor tells me that 114-116 grand is borderline... NOT 120. You have to include the 125year leasehold or whatever it is. Which is evident with flats as the poster above says.

It is not regardless of area therefore, depends on freehold or leasehold.

ps. even the name Stamp Duty is changed.. Land Tax or something I forget.

Ian_W

Sorry Chris, it is Monday morning and maybe I'm being a bit thick [OK not terribly unusual any day of the week!] but you're saying SD kicks in earlier with leasehold?
Why? If you buy a l/h flat and pay the seller under £120k, you don't then pay the freeholder anything, just annual ground rent etc, so why should SD be applicable?

Prey do tell.

ChrisB_4

The government failed to mention in the budget that the value of the property must be added to the leasehold x lease period (125 yrs usually on new builds) and then this figure is used for the threshold for Land Tax (new name). My solicitor was grimacing as they said this as many first time buyers are getting caught out buying properties for 119/118.

MORPH3US

twisty wrote:

We're getting a cheque tomorrow (allegedly). I'm still going to report the firm anyway as we weren't mislead, we were actually lied to. Outwardly and blatantly. I'm very grateful for all your help, especially yours bossyboots and am relieved that (hopefully) the matter is, financially at least, resolved

Did the cheque turn up Twisty?!?!?

Georgia Sibbald, any news on your complaint, are you going to take it further?!??!

M

Bossyboots

ChrisB wrote:

The government failed to mention in the budget that the value of the property must be added to the leasehold x lease period (125 yrs usually on new builds) and then this figure is used for the threshold for Land Tax (new name). My solicitor was grimacing as they said this as many first time buyers are getting caught out buying properties for 119/118.

I have just spent some time calculating various permutations of rents on a property bought for £119,000.00 - £119,500 and I cannot make it bring up a calculation of any tax at all until the rent reaches £601. per year.

Also, even at £120,000 no tax applies. The first point at which it kicked in was when I put £120,005.

ChrisB_4

Yeah, it seems strange - I'll ring down solicitors tomorrow and find out more about what they say.

Ian_W

It would be helpful if you could Chris - I have a 950 year balance on my l/hold @ £20pa, which if I understand correctly, would mean mine would have to sell for £19,000 below the £250k threshold to avoid jumping from 1 to 3%.
Likely to be more of a problem for older properties, frequently subject to longer term leaseholds - certainly in this part of the world.
Though I'm still not sure from re-reading yours & Bossyboot's posts that I am understanding correctly how this should be calculated.

Bossyboots

Ian_W wrote:

It would be helpful if you could Chris - I have a 950 year balance on my l/hold @ £20pa, which if I understand correctly, would mean mine would have to sell for £19,000 below the £250k threshold to avoid jumping from 1 to 3%.
Likely to be more of a problem for older properties, frequently subject to longer term leaseholds - certainly in this part of the world.
Though I'm still not sure from re-reading yours & Bossyboot's posts that I am understanding correctly how this should be calculated.

I have just done some calculations based on your figures and you do not move over into the 3% until you actually go over the £250,000 threshold, even with your long lease.

Property Type Residential
Disadvantaged Area Relief
No

Effective Date of Transaction 22/08/2005
Start Date as specified in lease 22/08/2005
End Date as specified in lease 21/08/2955

Total premium payable £250000

Year 1 rent £20
Year 2 rent £20
Year 3 rent £20
Year 4 rent £20
Year 5 rent £20
Highest 12 monthly rent £20

Average annual rent £20

Term Of Lease 950 years






This calculation uses the rates and thresholds which were effective from 17/03/2005

Total Amount of Tax for this Transaction £2500

Net Present Value £570

Stamp Duty Land Tax on Rent £0

Stamp Duty Land Tax on Premium £2500

Ian_W

Chris B wrote: The government failed to mention in the budget that the value of the property must be added to the leasehold x lease period ...

Thanks BB, I take it you are using a software package to calculate SDLT? But I note it uses thresholds etc current on 17/3/05, I thought Chris was saying [rightly or wrongly] more recent changes had had brought this about.

I understood, IF indeed I understood correctly, his solicitor had said the formula would now be [using my figures]:
£250,000 + (£20pa x 950 years unexpired lease) = £269,000 effective sale price for SDLT purposes.