During his summer statement, Chancellor Rishi Sunak announced a temporary holiday on stamp duty on the first £500,000 of all property sales in England and Northern Ireland. This is part of the Government’s plan to boost the economy through the housing market and help buyers who have taken a financial hit due to the coronavirus crisis.
It is important to note that the changes announced on the 8th July, 2020 only apply to buyers in England and Northern Ireland.
Naturally, this will affect many people who began the process of buying property before lockdown, so we have put together some answers for the most common questions around this new scheme. If you are still unsure about what to do, our friendly estate agents are on hand to help, simply get in touch with your local Chewton Rose branch.
What is stamp duty?
When you buy property in the UK, you pay a tax called stamp duty. It’s slightly different across the UK, for example, in England and Northern Ireland buyers pay stamp duty land tax, but in Scotland it is land and buildings transaction tax, and land transaction tax in Wales.
The amount you pay varies depending on the price of the property being bought, and where it is in the UK. It also only applies to anyone who is not a first-time buyer. There are different rules for first-time buyers which we will explain later.
Who pays stamp duty and how much?
Before 8th July, 2020, In England and Northern Ireland stamp duty was paid on land or property sold for £125,000 or more.
As we explained, the rules for first-time buyers, are slightly different. They paid no tax up to property values of £300,000 and 5% on any portion between £300,000 and £500,000.
If someone has purchased property before (therefore no longer a first-time buyer) stamp duty rates were as follows:
- 2% on property valued between £125,001-£250,000
- 5% on property valued between £250,001-£925,000
- 10% on property valued between £925,001-£1.5 million
- 12% on any property valued above £1.5 million
Landlords must pay an extra 3% of stamp duty when they purchase a buy-to-let property in England and Northern Ireland. However, all of this has now changed after Rishi Sunak’s summer statement.
What has changed for stamp duty in England?
The Government has now increased the lower stamp duty threshold to from £125,001 to £500,000 for property sales in England and Northern Ireland.
Anyone who now purchases property below the new level will not pay stamp duty, as long as the deal is completed before 31st March, 2021.
As before this change was announced, anyone buying a second home or buy-to-let properties will still have to pay the 3% extra duty due on the entire price.
When will the stamp duty holiday happen?
The change to stamp duty is effective immediately from Wednesday 8th July, 2020 until 31st March, 2021. The reason it is temporary is to help revive the property market post-lockdown, with hopes that by next spring, things are back to normal.
Can I still benefit if I've already completed a purchase?
The stamp duty holiday applies from 8th July, 2020. This means anyone completing a property purchase before that date must pay the full normal stamp duty at the rates we mentioned above.
Any completions after this date falls under this new scheme and will pay the new rates. If you are purchasing a property under £500,000 after July 8th, you will no longer be paying stamp duty.
If you are currently purchasing a property with haart, please get in touch if you are concerned.
How much could buyers save?
"The average stamp duty bill will fall by £4,500. And nearly nine out of 10 people buying a main home this year, will pay no stamp duty at all," stated Chancellor Rishi Sunak during the announcement.
Ultimately, the more the property you are purchasing is valued at, the more you will save under this new scheme. Let’s look at some examples to see the changes:
Before the stamp duty holiday, if you bought a house for £200,000, the stamp duty to pay would have been £1,500.
That's based on 0% duty on the first £125,000, 2% on the next £75,000 (£1,500).
If the property was valued at £300,000, the stamp duty would have been £5,000.
That's based on 0% duty on the first £125,000, 2% on the next £125,000 (£2,500), and 5% on the remaining £50,000 (£2,500).
The holiday means anyone buying a home valued under £500,000 now pay 0% in stamp duty, until 31st March, 2021.
What about Scotland and Wales?
In Scotland, the rates on land and buildings transaction tax are 2% on £145,001-£250,000, 5% on £250,001-£325,000, 10% on £325,001-£750,000, and 12% on any value above £750,000, with Scottish landlords paying an extra 4% land and buildings transaction tax on top of standard rates.
In Wales, the rates on land transaction tax are 3.5% on £180,001-£250,000, 5% on £250,001-£400,000, 7.5% on £400,001-£750,000, 10% on £750,001-£1.5m, and 12% on any value above £1.5m, with Welsh landlords paying an extra 3% Land transaction tax on top of standard rates.
There are currently no announcements for this to change, but we will update this article if any arise.