Buying a home is very expensive, with a lot of costs and fees to pay on top of the purchase price. But what about building your own home? Do the same costs and fees apply or can it be a cheaper option?
One cost that can significantly increase the amount you pay to buy a home is stamp duty. How is building a home affected by this tax in comparison? Do you pay stamp duty on a self-build?
What is stamp duty?
Stamp Duty Land Tax (SDLT) is a tax that’s payable when you buy property or land over a certain price. Currently, these prices start at:
- £250,000 for residential properties
- £425,000 for first-time buyers who buy a residential property valued at £625,000 or less
- £150,000 for non-residential land and properties
These thresholds will end on 31st March 2025. If you buy a property for a price that’s lower than these thresholds, you don’t have to pay any stamp duty.
New thresholds will apply from 1st April 2025 and SDLT will be payable when buying property that costs:
- £125,000 for residential properties
- £300,000 for first-time buyers who buy a residential property valued at £500,000 or less
- £150,000 for non-residential land and properties
SDLT is applicable in England and Northern Ireland. In Scotland, Land and Buildings Transaction Tax (LBTT) is payable while Land Transaction Tax (LTT) is payable in Wales.
Do you pay stamp duty on a self-build?
Different tax rules apply when building a home instead of buying one. For a start, building work is not subject to stamp duty so you instantly save on these costs. As well as that, stamp duty isn’t levied against the value of your property once you’ve finished building it.
Stamp duty is only payable for the plot of land you intend to build your home on. Even then, the tax is only charged if the land’s value exceeds the threshold, as detailed above. As such, building your own home can save you thousands of pounds compared with buying an existing property to use as your home.
Build your dream home with a self-build mortgage
Self-build projects are becoming increasingly popular. Just as stamp duty differs for self-build homes, mortgages for this type of undertaking differ from standard residential mortgages. With a self-build mortgage, the funds are paid in stages throughout your project. This helps to keep you on track with your project and minimises the risk for the lender.
Arranging this type of mortgage can be complex and lengthy but that’s where our mortgage brokers come in. As experts in this field, they handle the nitty-gritty and match you with the right self-build mortgage lender. Each lender’s criteria is different so our brokers ensure that your building project meets the required specifications. As every project is different, lenders assess each application on a case-by-case basis. Your mortgage, in turn, is then tailored to meet the needs of your unique project.
To get started, just give our mortgage brokers a call on 01322 907 000. They can discuss your project requirements and assess your situation, providing guidance on the paperwork and type of planning permission needed. They can also advise you on ways to get financial help for your project alongside your mortgage, such as using the Help to Build: Equity Loan scheme. With access to exclusive deals, you can look forward to the right mortgage solution, enabling you to build your dream home.