Do You Pay Stamp Duty When Building a New Home?

Stamp duty is a tax that must be paid when purchasing property. However, there are various ways to either reduce your burden or avoid paying it completely. Some people wrongly assume that they have to pay stamp duty on the full value of their home if they are building it from scratch. That is not the case.

You don’t have to pay stamp duty when building a new home if you already own the land. Even if you don’t, you only have to pay stamp duty on the value of the land itself, not the house you’re building on it with the help of home builders.

Can you avoid paying stamp duty for a new purchase?

If you’re buying land to build a house on it, you won’t have to pay stamp duty on the value of the house itself. For example, if you buy a piece of land for £50,000 and build a house that costs £500,000 on it, you will only have to pay stamp duty on the £50,000.

On the other hand, if the house from the above example is already built and you purchase it along with the land, you’ll have to pay stamp duty on the full £550,000 value. This can make it more economically viable to build a new home instead of purchasing a new one.

According to the government, there are also various specific cases where you can be exempt from paying stamp duty. These include:

• Property deals where no money is exchanged
• Property you’ve received through a will
• Freehold property valued at less than £40,000
• Property transfers related to divorce and other similar proceedings

Reference:

• Stamp Duty and Tax from lofti.co

There are some additional exemptions that might apply to you. Refer to the official guidelines for more information.

Takeaway: It is possible not to pay stamp duty on the value of the house itself if the land is already owned. There are also specific cases where people may be exempt from stamp duty, such as when no money is exchanged or the property value is less than £40,000.