Stamp duty is a tax that is levied on various financial transactions, including property transactions. The tax is typically paid by the buyer of the property or the person who is exercising an option to buy the property. There has been some confusion around whether stamp duty is payable on an option agreement, so in this article, we will look at this issue in detail.

An option agreement is a contractual agreement between a property owner and a potential buyer, which gives the buyer the right to purchase the property at a pre-agreed price, within a pre-agreed time frame. Option agreements are commonly used in property transactions, particularly in situations where the buyer needs more time to secure financing or to undertake due diligence.

In general, stamp duty is not payable on an option agreement, since an option agreement does not transfer ownership of the property. However, if the option agreement includes a provision that requires the buyer to pay a deposit or other consideration, then stamp duty may be payable on the amount of the consideration.

For example, if the option agreement requires the buyer to pay a deposit of £10,000, then stamp duty would be payable on this amount at the prevailing rate. In the UK, the stamp duty rate on residential property transactions is currently 0% for properties up to £500,000 and 5% for properties over this threshold. The stamp duty rate on commercial property transactions is 1% for properties up to £250,000 and 5% for properties over this threshold.

It is important to note that if the buyer decides not to exercise the option to buy the property, then any consideration paid (including the deposit) would be refundable, and no stamp duty would be due.

In conclusion, stamp duty is not generally payable on an option agreement, unless the agreement includes a provision for the payment of consideration. If you are unsure whether stamp duty is payable on an option agreement, it is best to seek advice from a qualified legal professional or a tax specialist.