On Wednesday 8th July, the Chancellor Rishi Sunak announced an increase on the stamp duty threshold on a temporary basis from £125,000 up to £500,000, which is planned to run until 31st March 2021. This is being introduced in a bid to help the UK economy recover from the coronavirus pandemic.
What is stamp duty?
In a recent survey, 26% of people told us they don’t know what Stamp Duty is. In a nutshell, Stamp Duty Land Tax (SDLT) is a government imposed tax which is paid as a lump sum on completion by people who are purchasing a property or land over a certain price bracket
Before the announcement was made on 8th July 2020, people buying houses in England and Northern Ireland had to pay stamp duty on property with a value over £125,000, however, first-time home buyers were exempt from this charge unless the property was over £300,000. Read more about previous Stamp Duty Land Tax rates.
What will happen with the introduction of the new stamp duty announcement?
All buyers are now exempt from paying stamp duty land tax on properties up to £500,000 which will help home buyers save costs fundamentally across the UK. The Chancellor has mentioned that home buyers will make an average saving of around £4,500 on their bill with this latest news, and that 9 out of 10 people getting on or moving up the property ladder in 2020 will pay no stamp duty as a result. The amount you could save varies according to your property price; see our examples below for an estimate of what you could save:
You are purchasing a property in England (non-first time buyer) for £450,000. Before today’s announcement you would have paid £12,500 in Stamp Duty, but after today’s news you would pay £0 Stamp Duty.
You are purchasing a property in England (non-first time buyer) for £600,000. Before today’s announcement your Stamp Duty liability would have been £20,000. Following today’s announcement you will now pay £5,000.
You are a first time buyer, choosing a property in England worth £350,000. Previously, you would have paid £2,500 Stamp Duty but now you will pay £0.
You are purchasing a second property, maybe a buy-to-let or investment property in England worth £300,000. This is in addition to already owning a main residence. Previously, your Stamp Duty liability would have been £14,000 but after today’s news this would become £9,000.
How will this affect first time buyers?
Prior to this announcement first time buyers were exempt from stamp duty for up to £300,000 but had to pay 5% on a property with a value of £300,001 and £500,000. However, if you are a first time buyer purchasing a property with a value over £500,000, you would now follow the same rules as other buyers who have purchased a property before.
This new reduction will allow first time buyers to purchase properties up £500,000 without having to add in extra cost for Stamp Duty Land Tax and provide a greater opportunity for people to get on the housing market quicker.
If you are looking to purchase a property or have found a property you are buying get a free conveyancing quote online. Please note we will calculate the Stamp Duty Land Tax for you, so you don’t have to.
Disclaimer: The article above is only a rough guide on Stamp Duty Land Tax Holiday.