Plans revealed that the Chancellor raised the stamp duty threshold from £125,000 to £500,000 for movers and first-time buyers, increasing from £300,000. This is welcoming news for home buyers with nearly nine out of ten transactions no longer subject to stamp duty until the 31st March 2021.
The news was announced in March this year and later confirmed on Wednesday 8th of July, and as a result, the housing market has seen a real boom. Previously the up-front cost of stamp duty was often a barrier for buyers, so the stamp duty holiday will help more people onto the property ladder.
As an example, if you’re looking for a property at £426,000 then you will save £6,300 on stamp duty, but the stamp duty holiday can save buyers as much as £15,000 if they are buying a property of £500,000 or more.
Why has the chancellor introduced the measures?
The move is in aid of helping buyers who have taken a financial hit because of the coronavirus crisis. It was also intended to boost a market hit by lockdown, which according to Halifax saw house prices fall for four consecutive months.
What is stamp duty?
Stamp duty in its correct term is stamp duty land tax (SDLT for short) which is a tax payable on all property transactions in England and Northern Ireland. The stamp duty is usually the largest cost associated with a house purchase which at times can cost buyers more than the fees payable to their solicitors, mortgage advisors and valuers connected.
How does stamp duty work?
Homebuyers pay stamp duty when they purchase a property over a certain price, the rate of the tax paid varies depending on the value of the property. However, if you are a first-time buyer then you would already be exempt from the tax the first £300,000 of the property price.
What are the new stamp duty rates?
The Chancellor’s announcement means that until the end of March 2021 people searching for their new home will only start to pay stamp duty on property above £500,000. This is for both first-time buyers and those moving up or down the housing ladder. Here is a breakdown of the new stamp duty rates under the holiday period:
- Up to £500,000 - 0%
- The next £425,000 (the portion from £500,001 to £925,000) - 5%
- The next £575,000 (the portion from £925,001 to £1.5 million) - 10%
- The remaining amount (the portion above £1.5 million) - 12%
The government has updated their website with a new stamp duty calculator so you can work out how much you need to pay under the new changes and, crucially, how much you’ll save. Remember, the benefit from these reduced rates means your purchase must be completed before 31st March 2021.
If you’re looking for a local law firm to help you with the legal side of buying or selling a property, please contact our conveyancing solicitors today.