Ever Wondered Why? Stamp Duty and Rental Properties
In the first part of our ‘Ever Wondered Why?’ series of blog posts, designed to give you the inside track on estate agency, we are asking if you’ve ever noticed the words ‘Stamp Duty Land Tax’ on your tenancy agreement.
‘What?’, you may ask. Isn’t stamp duty confined only to sales? That’s what most people think – and, indeed, many agents will just gloss over the part of a rentals contract that mentions the words ‘stamp duty’.
But stamp duty does, in fact, apply to renting property, as well as buying it. If you’re a tenant, you don’t need to panic, though: it’s not relevant to the majority of tenancies.
In the UK, stamp duty is currently payable on residential property that costs more than £125,000. Most people know that when you buy a house or an apartment, you have to pay this tax to the Government upon completion of the purchase. The amount paid differs according to the sale price.
But the charge still applies if you are renting a property. In other words, if you pay more than £125,000 to live in a residential building, you need to pay stamp duty.
OK, so, you must be wondering: can anyone possibly spend that much on rent?! Of course, this is not a monthly figure; it refers to the total cost of rent for the whole tenancy. So, if your tenancy agreement lasts for 12 months and you pay more than £125,000 in rent during that time, you will be called upon to send a fee to the tax office.
On a 12 month lease, then, you’d have to pay stamp duty if your rent was above approximately £10,400 a month.
A tenant will be charged only for the portion of the rent that is over the threshold. If you paid £130,000 in rent for the whole year, then, you’d be charged tax on the £5000 that takes you above the stamp duty threshold.
It’s important to know that this tax is the sole responsibility of the tenant; not the landlord.
If this rule hardly ever applies to our tenants at Julie Twist Properties, though, why are we telling you about it? Many of you must be thinking that this must only really apply to highly priced London properties.
But, just take a look on Rightmove and you’ll see that there are plenty of properties on the market in Greater Manchester with monthly rents over £10,000. And a number of UK tenants face fines every year because they don’t know about this rule.
Although, if you’re already paying £10,000+ a month on rent, perhaps you can afford the fine!
In any case, the eagle-eyed among you might just be curious about those little words on your tenancy agreement. So, mystery solved!
If you have any queries about tenancy law, you can always contact us for an explanation. Our property managers are always happy to help!
Posted by Stacie on May 15th, 2015
Posted by admin on November 1st, 2012
Posted by Stacie on November 12th, 2015