The Stamp Duty Holiday and What This Means for You
What is it?
Chancellor Rishi Sunak has announced a Stamp Duty Holiday which will run from 8 July 2020 until 31 March 2021. The Stamp Duty Holiday is a temporary measure and will be applied to all residential purchasers, including first-time buyers, second-steppers and those who are looking to downsize.
Why is there a Stamp Duty Holiday?
The housing market has been hit hard by the Covid-19 pandemic, with lockdown putting sales on hold and preventing work on many construction sites around the country.
The number of conveyancing transactions was down by 50% in May this year, and according to Halifax house prices have fallen for 4 months in a row.
It is hoped that the temporary changes will boost the struggling housing market, with estate agents saying this is “huge news” for the property market.
How will it work?
The Chancellor has suggested that the average stamp duty bill will fall by £4,500, with nearly 9 out of 10 people buying a main home this year having to pay no stamp duty at all.
Prior to Wednesday (8 July), house buyers in England and Northern Ireland had to pay 3% stamp duty on properties worth up to £250,000 and 5% on properties up to £675,000, unless they were first- time buyers who only had to pay stamp duty if the purchase price was more than £300,000 (or £500,000 if buying in London).
The temporary changes mean that if the property purchased is your main residence you won't pay any stamp duty at all if it costs £500,000 or less. The next portion of the property's price (£500,001 to £925,000) will be taxed at 5%, and after that (£925,001 to £1.5 million) will be taxed at 10%. The remaining amount (over £1.5 million) will be taxed at 12%.
The stamp duty holiday could save you as much as £15,000 if you are buying a property for £500,000 or more. That’s a big saving!
Who will be affected?
Stamp duty is payable on completion, so if you have exchanged contracts and are currently waiting for completion you will be able to benefit from the change.
Landlords and second home buyers are also eligible for the tax cut but will still have to pay 3% of stamp duty on a property up to £500,000. The next portion of the property's price (£500,001 to £925,000) will be taxed at 8%, and after that (£925,001 to £1.5 million) will be taxed at 13%. The remaining amount (over £1.5 million) will be taxed at 15%.
For example, a second home buyer buying for £172,000 before the stamp duty holiday was implemented would have paid £6,100 in stamp duty (3% up to £125,000 and 5% on the remaining £47,000. Under the new changes stamp duty is recalculated at £5,160 (3% on the whole £172,000).
The holiday applies from 8 July, so unfortunately if your transaction completed before this date, you still have to pay the full normal stamp duty.
Use this helpful calculator to see how the changes might affect you – https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro
Our Conveyancing Team will be happy to help you with any queries. Call us on 02392 660261