Rishi Sunak, the UK Chancellor, has announced a stamp duty holiday in a government package to help the economy post-lockdown. Here is what it means.
Stamp duty (officially called stamp duty land tax) is a charge paid to the government when someone purchases a property or plot of land. It is payable once a sale is completed and based on the total property price.
Original Stamp Duty Rules
The liability for stamp duty was waved for first time buyers with properties costing £300,000 or less in 2017. For house prices above £300,000, stamp duty was calculated only on the amount over £300,000.
A mover would pay 0% on the first £125,000, 2% on the next £125,000, 5% on the next £675,000, 10% on the next £575,000 and 12% on anything above £1.5m.
What has changed?
The threshold for first-time buyers and movers will rise to £500,000 on all sales completed before the 31st of March 2021. For properties above £500,000, stamp duty is paid only on the amount over £500,000 at a scaling rate.
The changes will apply from today in England and Northern Ireland, but will not apply in Scotland or Wales.
How much could you save?
To see how meaningful these changes are, let’s look at a couple of examples.
First time buyer at £450,000
Amount taxable: £450,000 – £300,000 = £150,000
Tax payable: 5% of £150,000 = £7,500.
No duty payable as the price is under £500,000.
A total saving of £7,500.
A mover at £750,000
First £125,000 at 0% = £0
Second £125,000 2% = £2,500
Final £500,000 5% = £25,000
Tax payable: £27,500.
First £500,000 at 0% = £0
Final £250,000 at 5% = £12,500
A total saving of £15,000.
What effect will this have?
The government says the temporary move will mean 9 out of 10 people buying a home this year won’t need to pay any stamp duty at all. This will free up funds to purchase properties outright or allow more people to purchase and invest funds in those requiring greater refurbishment.
Here at Wainwrights we have had a very busy post-lockdown period as many people look to make up for lost time. This tax relief is a much welcomed change to help keep the market moving.
Reminder when Stamp Duty is not payable
According to the government site www.moneyadviceservice.org.uk these situations do not require stamp duty charges:
– Slightly over rate band. If the price is only just within a higher band, ask the seller or estate agent if they would accept a slightly lower price.
-Transfer of property in separation or divorce. If you’re divorcing or separating from your spouse or partner, there’s no Stamp Duty to pay if you transfer a proportion of your home’s value to them. Read more in our guide Protecting your home ownership rights during divorce or dissolution.
– Transfer of deeds. If you transfer the deeds of your home to someone else, either as a gift or in your will,they won’t have to pay Stamp Duty on the market value of the property.
If you would like help selling or buying a home, get in touch with us today.