Emma Liddle, partner and head of residential conveyancing at Mincoffs Solicitors, explores how buyers can mitigate unexpected surprises when purchasing a new build property.
Choosing to purchase a new build property and reserving a plot early enough means that buyers get a say on everything from carpet colours to the material used in the kitchen countertops. However, many new home owners aren’t aware that some optional extras could also land them a much higher Stamp Duty Land Tax bill than they had budgeted for.
What is Stamp Duty?
Stamp Duty is a tax which is charged on property purchases over a certain threshold. Stamp Duty usually applies when buying a property or if someone is transferred land or property in exchange for payment. There can be exemptions or reliefs brought in by the government.
The total sum on which buyers pay Stamp Duty on is often called ‘the consideration’ and is the price paid for property or land.
The amount of tax payable depends on more and more factors as new regulations are introduced. Things which affect this amount include being a first time buyer, owning other properties and living outside of the UK. It has become more and more complex over the last decade.
Could new build optional extras be adding to your Stamp Duty bill?
Stamp Duty applies to the full price paid to a new build developer at completion.
After reserving a plot, developers will often give buyers the option to upgrade certain areas of their new home. Some of these will be classed as chargeable consideration, which will then become part of the total price paid to the developer.
For an item to be chargeable for Stamp Duty purposes, it must be attached to the property. HMRC do not provide an exhaustive list of what they deem chargeable and it is assessed on a case by case basis. Examples of what could be included as taxable extras include sinks, underfloor heating and integrated appliances. What would not be included in the purchase price for Stamp Duty calculations includes carpets, curtains or a free-standing fridge-freezer.
How to avoid a Stamp Duty shock
Developers may not highlight the tax implication clearly when advertising their extras and an unexpected bill can throw a spanner in the works for buyers who are working to tight budgets.
It would be advisable to discuss what could be classed as additional charges with the conveyancer acting on the purchase at the earliest possible opportunity. Buyers may also want to consider speaking to a specialist tax advisor regarding HMRC guidance on what constitutes chargeable consideration when it comes to the optional extras.
Buyers should ask developers for a full breakdown in terms of what’s included and what’s additional. It is also worth checking with a mortgage adviser, as changes to the purchase cost will likely affect agreed mortgage terms.
Experienced solicitors can spot these issues early
Buying a new build home should be an exciting step, not one overshadowed by surprise tax bills.
Mincoffs’ conveyancers are experts in helping buyers navigate the complexities of property purchases and sales, including for new builds. With more than 100 years’ combined experience across the conveyancing team, the firm offers clear, proactive communication and a meticulous approach to every transaction.
With the right advice and guidance, unexpected Stamp Duty charges on optional extras can be anticipated and managed.
Contact Mincoffs’ expert conveyancing team by emailing enquiries@mincoffs.co.uk or call the office on 0191 281 6151.
www.mincoffs.co.uk