UK Chancellor Rishi Sunak has temporarily raised the stamp duty tax threshold until next year in an effort to boost the property market amidst the ongoing coronavirus crisis.
The government has increased the stamp duty threshold to £500,000 for property sales in England and Northern Ireland, lasting until 31 March 2021.
Now, let’s clarify exactly what this means:
What is stamp duty?
Stamp Duty Land Tax is a property tax paid by someone who purchases property or land in England or Northern Ireland (it’s slightly different from Scotland where it is called Land and Buildings Transaction Tax, while in Wales it’s known as Land Transaction Tax). This tax is only paid when the sale is complete and is based on the sum paid for the property or land.
Who can benefit from the UK stamp duty holiday?
Before the Chancellor’s announcement, there were two different scenarios in which stamp duty was payable in England and Northern Ireland. For movers (i.e. not first-time buyers), stamp duty had to be paid on any property costing £125,000 and above, while first-time buyers didn’t pay stamp duty on properties costing £300,000 and below. This starting threshold has now been increased to £500,000, and will also apply to second homes and additional properties (such as those let by landlords), though these will still attract a 3% surcharge, as was the norm under previous rules.
How much stamp duty do you have to pay now?
To recap, first-time buyers purchasing a primary residence up to £500,000 will not pay any stamp duty, potentially saving as much as £15,000. The next highest bracket (between £500,001 and £925,000) will be taxed at 5%, with the following bracket (£925,001 to £1.5 million) taxed at 10%, and anything over £1.5 million taxed at 12%. Note that the 3% surcharge still applies to all purchases of a second property.
Until when does the UK stamp duty holiday apply?
The holiday applied immediately from July 8th, which means anyone completing a property purchase between 8 July 2020 and 31 March 2021 will not have to pay the full normal stamp duty.
Stamp duty is also only payable upon completion of a purchase. This means that even if you started proceedings before July 8th and are currently waiting for finalisation, you will be allowed to benefit from the new rules. While March 2021 might seem far away, it’s advisable to start the purchasing process sooner rather than later if you want to make it within the designated time frame.
It appears that buyers have jumped at the opportunity since it was first announced three weeks ago, with property website Zoopla reporting that house sales in London grew by 27% in the first two weeks of the stamp duty holiday, and year-on-year buyer enquiries in Britain up 75% since the start of July, according to property platform Rightmove.
While the stamp duty changes have sped up the property market’s recovery significantly, there had already been a noticeable uptick in activity prior to the changes as a result of pent up demand being released to the market.
This uptick in the market mirrors our experience at Tailor My Property, where we’ve been inundated with clients seeking to capitalise on the short-term savings, often bringing forward their future investment plans.
Contact us to find out more about our specialist services and incredible network of property and finance experts.
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