Stamp Duty Payable on Loan Agreement: Everything You Need to Know
If you`re taking out a loan, you may have heard of stamp duty. But what is it and who has to pay it? In this article, we`ll cover everything you need to know about stamp duty payable on loan agreements.
What is stamp duty?
Stamp duty is a tax on documents or transactions. It`s a form of government revenue that is collected from individuals or businesses for various legal documents. It`s called stamp duty because in the past, physical stamps were used to indicate that the tax had been paid.
In the UK, stamp duty is usually paid when buying a property. However, stamp duty may also be payable when entering into a loan agreement.
When is stamp duty payable on a loan agreement?
Stamp duty is payable on a loan agreement if the agreement is secured on property or land. If you`re taking out a loan that is not secured on property or land, you won`t have to pay stamp duty.
For example, if you`re taking out a personal loan or a business loan that is not secured on property or land, you won`t have to pay stamp duty. However, if you`re taking out a mortgage, you will have to pay stamp duty.
How is stamp duty calculated?
The amount of stamp duty payable on a loan agreement depends on the value of the property or land that is being used as security. The rates for stamp duty are different in England, Wales, Scotland, and Northern Ireland.
In England and Northern Ireland, the rates for stamp duty are as follows:
– Up to £125,000: 0%
– £125,001 to £250,000: 2%
– £250,001 to £925,000: 5%
– £925,001 to £1.5 million: 10%
– Above £1.5 million: 12%
In Scotland, the rates for stamp duty are different:
– Up to £145,000: 0%
– £145,001 to £250,000: 2%
– £250,001 to £325,000: 5%
– £325,001 to £750,000: 10%
– Above £750,000: 12%
Meanwhile, in Wales, the rates for stamp duty are as follows:
– Up to £180,000: 0%
– £180,001 to £250,000: 3.5%
– £250,001 to £400,000: 5%
– £400,001 to £750,000: 7.5%
– £750,001 to £1.5 million: 10%
– Above £1.5 million: 12%
It`s important to note that stamp duty rates may change, and you should always seek professional advice before entering into any loan agreement.
Who pays the stamp duty?
The stamp duty is usually paid by the borrower when entering into a loan agreement. However, if the lender is also required to sign the loan agreement, they may be liable for a portion of the stamp duty.
In some cases, the borrower and the lender may agree to split the cost of the stamp duty. This is something that should be agreed upon before entering into the loan agreement.
Conclusion
In summary, stamp duty is a tax payable on documents or transactions. If you`re taking out a loan, you may have to pay stamp duty if the loan is secured on property or land. The amount of stamp duty payable depends on the value of the property or land, and the rates may differ depending on your location. Always seek professional advice before entering into any loan agreement to ensure that you understand your stamp duty obligations.