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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.

There are three species or types of property: Land, Improvements to Land and Personalty. Real estate, real property or realty are all terms for the combination of land and improvements. The taxing authority requires and/or performs an appraisal of the monetary value of the property, and tax is assessed in proportion to that value. Forms of property tax used vary between countries and jurisdictions.

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