Stamp Duty Exemption, Which Areas Qualify?

Did you know that there are areas in the UK that are exempt from paying Stamp Duty on properties worth up to £150k? 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 lower.

To understand the effect of this on the purchase of a property let's look at the normal rates of Stamp Duty levied on property transactions (not including first time buyers who are Stamp Duty exempt up to a transaction value of £250k). Normally for transaction values of less than £125,000 then there is nothing to pay in terms of Stamp Duty. For transaction values of greater than £125,000 and up to £250,000 then a Stamp Duty levy of 1% will normally be applied. For transaction values of greater than £250,001 up to £500,000 then a Stamp Duty levy of 4% will be applied. For transactions greater than £500,001 and up to £1million Stamp Duty is 4% and for transactions of over £1 million the Stamp Duty levy will rise to 5%, its highest level.

This means that purchasing a property for £150,000 in an exempt area will save you £1500 over purchasing a property of the same value in a non exempt area (excluding first time buyers).

If you are entering the property market for the first time and can class yourself as a first time buyer then as previously mentioned the Stamp Duty levy is slightly different. For first time buyers there is zero Stamp Duty on property worth up to £250,000. This lasts until 25th March 2012 and was announced, as an incentive for first time buyers, by Chancellor Osborne in the 2010 budget.

Exempt areas in Scotland are based on postcode areas while in England and Wales exempt areas are based on local electoral wards.

That's how they're organised, but how they are chosen? It goes on a scale of deprivation, all areas exempt are classed as deprived and/or a development areas earmarked by local and central government. To find which areas these are, there are PDF lists on the HMRC website as well as a postcode finder to find out if your area qualifies for relief.

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.

In Scotland, the postcode to watch is ML3, a Motherwell postal area with 89% of properties falling under the exemption threshold. It is important to point out that with the housing market in the state that it is in, these areas might no longer, or soon be, no longer be the most saturated with properties that qualify for the higher rate exemption.

The most of you won't need this advice but we think it is always worth saying the obvious, if you are purchasing a property between £125,000 and £150,000 try finding out if it qualifies as exempt. We can imagine a situation where a buyer pays Stamp Duty on a property when they do not need to. Make sure it's not you.

If you are looking to move into a new property then extra care should be taken as the postcode may not have been registered with the HMRC system. With large numbers of new postcodes being registered every year delays are possible.

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