A NEW stamp duty holiday means any purchase of a property up to £500,000 will be exempt from paying any tax.
Chancellor of the Exchequer, Rishi Sunak, announced the waiver is effective immediately on homes in England and Northern Ireland until 31 March 2021.
The Treasury says nine out of 10 people getting on or moving up the property ladder (or downsizing) this year will pay no stamp duty as a result. Over 291,000 properties under £500,000 are currently available for sale on Rightmove, making up 78% of all properties available for sale in England.
Here’s everything you need to know about the changes to stamp duty:
Before the temporary measures came into force – on Wednesday 8 July – there was no stamp duty to pay (in England and Northern Ireland) on property costing up to £125,000.
Buyers paid 2% on up to £250,000, 5% on between £250,001 and £925,000.
The rates rocket to 10% for a home costing more than £921,001 up to £1,500,000 and 12% on anything over £1,500,001.
For first-time buyers stamp duty rates were different. The tax kicked in at £300,000 – if buying a property worth less than £500,000 – and 5% was charged on any portion between £300,001 and £500,000.
From now until March next year buyers won’t pay any stamp duty on a property costing £500,000 or less.
How much a buyer could save under the temporary measure will depend on how much the property costs.
According to calculations by the Centre for Economics and Business Research (CEBR) the average saving will be £4,400 per property and result in 101,000 extra sales over the next nine months.
If you buy a property for £400,000 in England (and you’re not a first-time buyer), you would usually pay £10,000, made up of £2,500 on the portion between £125,001 and £250,000, and £7,500 on the portion between £250,001 and £400,000.
But now you would pay no stamp duty on the property at all – saving you £10,000.
For a property costing £400,000 a first-time buyer will save £5,000 in stamp duty.
There are 16 local authorities with an average house price above £500,000, according to estate agent Barrows and Forrester. The reduction in stamp duty costs on the first £500,000 of their property purchase means a saving of £15,000.
A stamp duty bill is triggered only when you complete the purchase of a property. So if you’ve exchanged – prior to 8 July – but not completed, you’ll benefit from the increased threshold. Those that have completed recently will not benefit as the new rules are effective from 8 July and cannot be backdated.
The Chancellor included buy-to-let landlords – as well as second-home buyers – in the increased threshold, although they still have to pay the 3% additional homes levy.
That means that for purchases up to £500,000 the bill is 3%. The portion from £500,001 to £925,000 is charged at 8% and from £925,001 to £1.5m at 13%. Anything above £1.5m will be payable at 15%.
Property investors who purchase through limited companies will also be exempt up to £500,000.
For a property costing £350,000 landlords will save £7,500, reducing the tax bill from £18,000 to £10,500.
Scotland and Wales have devolved systems and have not yet announced any measures surrounding stamp duty.
Hiten Ganatra, managing director of Visionary Finance, says: “The cut will encourage previously hesitant buyers to go ahead with a purchase now that -whether upsizing or downsizing – there are big savings to be made.
“Those higher up the ladder and first-time buyers in more expensive cities such as London set to benefit too with the new threshold at £500,000. The measures should relieve some of the financial pressure on buyers who can now put stamp duty savings towards a deposit.
“This in turn will help with getting a mortgage offer – and reduce monthly payments.
“While lenders are understandably being cautious in terms of affordability at the moment, they still have an appetite to lend and mortgage rates are extremely attractive.
“Enlisting the help of a broker is important right now, so you can approach the right lender for your individual circumstances.”