How To Avoid Paying Stamp Duty In 2011!

Did you know that there are areas in the UK that are exempt from paying stamp duty on properties worth up to150k GBP? In the UK there are 2000 areas that fall under this ruling introduced in 2001 by HMRC. For all other areas the threshold is 25k GBP lower.

Property transactions attract stamp duty at stepped intervals dependent on the transaction value and if you are a first time buyer or not. For first time buyers no stamp duty is paid on property valued up to 250k GBP. Stamp duty is normally levied at values over 125,000 GBP, so for property transactions of between 125,000 GBP and 250,000 GBP a 1 per cent stamp duty is levied; for values between 250,001 GBP and 500,000 GBP a 4 per cent duty is levied. For properties over 1 million GBP the Stamp duty levy increases to 5 per cent.

This could mean a saving of up to 1500 GBP by purchasing a property in an exempt area, for example a property valued at 150,000 GBP would normally attract a stamp duty levy of 1500 GBP but in an exempt area that would be reduced to zero!

Chancellor Osborne in the 2010 budget announced first time buyers are exempt from stamp duty on property worth up to 250,000 GBP until 25th March 2012, this exemption covers the whole of the UK and not just the already announced and standing exempt areas.

So how are these areas decided and where are they is what you really want to know? To answer this we have to differentiate between Scotland and England/Wales, in Scotland the exempt areas are based on postcode areas while in England and Wales they are based on local electoral wards.

The HMRC website list areas that fall under this exemption along with a handy post code checker that allows you to see if your property falls into the right area. These areas are normally designated as exempt because of the level of depravity. If the area has been identified as deprived or in need of regeneration then they could become one of these exempt areas.

As you may expect the number of eligible areas rise as you go north. This will be a factor of house prices and depravity. The North East holds the highest number of eligible areas that qualify for relief, though a Coventry Ward (CV6) appears to have the most densely concentrated number of properties that could possibly be eligible.

Moving further north and crossing the border into Scotland we can see that some areas of Motherwell have up to 89 per cent of properties that could potentially qualify for the exemption. It has to be noted though that as the housing market drop then other areas may become more densely populated with eligible housing stock.

So now for a statement of the obvious, when buying a property try finding out if you are moving into a stamp duty exempt area (for properties under 150,000 GBP). We do not want to see any buyers out there paying more stamp duty than they have to!

This can happen in the case of newly built property such as housing estates etc. In these cases it may well be that the new postcodes created need to be added to the HM Revenue & Customs database and as nearly 8,000 postcodes are added yearly this can cause a delay. Worth keeping an eye on.