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Types Of Property Tax Explained

posted 24 Feb 2013, 06:00 by Mpelembe Admin   [ updated 24 Feb 2013, 06:01 ]
Several famous people including Benjamin Franklin have said
over the centuries that the only certain things in life are
death and taxes!

While we can't help with the former, we can with tax – and

especially helping you to understand property tax.

It's an unfortunate fact of life that you could be charged
money in the form of a tax when you move house, especially if
you are a property developer trying to make a profit.

There are several different ways that you can be stung. And
while this article can't help you legally minimise your property
tax bill (there are plenty of accountants who will do that), it
can at least make you aware what you might end up paying.

Here are the main types of property tax explained and explored:


Stamp duty

This is the main way most people in the UK pay a tax on their
home. It's a tax that has been around for more than 300 years,
and was introduced as a tax on written documents that needed a
physical stamp to be attached. These days it exists primarily as
a tax on the transfer of shares and securities, and in a
different form, as a property tax.

You pay stamp duty land tax when you buy a house or other
property, and the amount of tax paid depends on the purchase
price. The current threshold for a domestic property is
£125,000. If the purchase price is below this – no tax charge
for you. But if the house costs between £125,001 and £250,000,
you'll pay 1 per cent of the purchase price in tax.

And that percentage goes up, the higher the asking price of the
house. If it's between £250,001 and £500,000 it's 3%. And for
homes worth more than half a million pounds, it's 4%.

There's one other exception if you are buying a house in an
area the government has declared a disadvantaged area. There you
don't pay any property tax if the purchase price is £150,000 or
less.

Capital gains tax

This is a property tax that you pay when you sell your house –
but the good news is that most of us won't pay it. CGT doesn't
apply in most cases when you are selling your main home, only if
you are an investor and have extra properties that you wish to
sell. Then you amount of tax you pay will depend on your income
and how many other chargeable properties or other capital gains
you have made. It can be as low as nothing and as high as 40% of
the profits you have made! Most investors need an accountant to
help them plan for this and keep their tax bill as low as
possible.

Inheritance tax

Some people call this death tax, as you are only liable to pay
it when you inherit something from someone who has died. If it's
under the threshold of £285,000 you won't pay anything – but
anything above that is taxed at 40%. Thanks to the huge increase
in house prices over the last few years, there are many
"ordinary" people who have property worth that much, meaning
many more people are being stung by this tax. Years ago only
very rich people were hurt by it; current figures show 2.4
million people will now be affected when they die.

Again, a good accountant should be brought in as early as
possible to help plan and minimize this tax. It's relatively
easy and perfectly legal to change your estate years before you
die to prevent having to pay it.

Property Today link:
http://www.propertytoday.co.uk/Types-of-property-tax-explained.11018.3786479.story


About The Author: For more information about property tax, try
visiting http://www.propertytoday.co.uk

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