Conveyancing Fees: Where Does All The Money Go?
What proportion of the overall legal costs of purchasing a house or flat in England and Wales goes to your Conveyancing Solicitor?
Say you were buying a property at 350,000. OK that's a bit above the average but by no means in the realms of the super rich.
The answer and, at the risk of exploding an urban myth, is that only 5-6% of the legal costs goes to your Conveyancing Solicitor
I am afraid there are no prizes for guessing where the rest goes?: A whopping 90% to the government in Stamp Duty Land Tax and VAT, with a further 2% to another Government Department, the Land Registry, the rest being search fees, and bank transfer fees.
It is incredible that out of an overall cost of 11765 that around 10600 goes on Stamp Duty Land Tax (SDLT) and VAT
What is Stamp Duty Land Tax anyway?
Its name was changed by the then Chancellor Gordon Brown a few years back. It was one of his tax changes that didn't quite make his budget speech, but turned up in the small print later. It is in fact a new tax and different to the old Stamp Duty.
Originally, Stamp Duty was levied in the late 17th Century to build up the war chest for a war against France.
Personally, I would hazard a guess that we must have enough in the kitty by now to have a go. At the very least reclaim Calais.
You will pay SDLT on any purchase over 125000, subject to a couple of exemptions.
1. If you are a first time buyer (strictly defined) you are exempt from SDLT up to 250000 2. If you are buying in a so called "Disadvantaged Area" you will be exempt up to 150000.
SDLT is payable on the whole amount of the purchase price.
It now kicks in at 1% at 125001 and 3% if you go above 250,001.
The situation gets worse if you are buying over 500,001 where the tax is levied at 4% on the whole of the purchase amount with no graduation or tapering to soften the blow.
And from next year if you buy at over 1,000,000 you'll be hit with a staggering 5%
If you want to have an idea about budgeting for your move, check out the online for Conveyancing Costs Calculator.
So next time you are in conversation with someone who has just purchased a property and claimed that their legal fees were in the thousands of pounds, you have the opportunity to remind them where the money really went!
by: Paul Hajek
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