Chancellor Rishi Sunak has announced a stamp duty holiday for all property buyers in a bid to boost the housing market and wider economy post-lockdown.
Speaking at the summer economic update, Sunak confirmed plans to temporarily raise the stamp duty threshold from £125,000 to £500,000 in England and Northern Ireland.
1/ I have decided today to cut stamp duty.
— Rishi Sunak (@RishiSunak) July 8, 2020
The stamp duty holiday, which takes effect immediately, will run until the 31st of March 2021. Sunak said nine out of 10 people buying a main home this year will pay no stamp duty as a result of the change.
This is fantastic news for the property market – but what does this mean for you? Let’s take a look…
Stamp duty is a lump-sum tax that anyone buying a property or land costing more than a certain amount must pay.
In England and Ireland, buyers have to pay Stamp Duty Land Tax when buying a home or piece of land worth more than £125,000. It’s charged on a tiered basis – so you only pay the higher rates on the slice above the threshold – the same as income tax.
But, there are exemptions available for first-time buyers. Those taking their first steps onto the property ladder don’t have to pay stamp duty on the first £300,000, so long as their home doesn’t cost more than £500,000.
Meanwhile, landlords pay an extra 3% of stamp duty when they buy additional property.
If you buy a home between now and 31st March 2021, you only start to pay stamp duty on the amount that you pay for the property above £500,000.
These rates apply whether you’re moving up and down the housing ladder or buying your first home.
Before the announcement, just 16% of sales in England were exempt from stamp duty, falling under the £125,000 bracket.
But now an extra 73% of sales will be exempt from the basic level of tax. That’s 89% of sales in total!
Unfortunately, no. The holiday applies from 8 July, which means anyone completing a property purchase before that date will have to pay the full normal stamp duty.
The more you pay – up to the new £500,000 threshold – the more you could save on stamp duty.
Before the stamp duty holiday, if you bought a house for £275,000, for instance, the stamp duty you’d have had to pay would have been £3,750.
That’s based on 0% duty on the first £125,000, 2% on the next £125,000 (£2,500), plus 5% on the final £25,000 (£1,250).
The holiday means anyone buying a home in Bramhall, Stockport would save £13,603 in stamp duty, based on Rightmove estimates of an average asking price of £472,053.
If you’re a first-time buyer, this recent announcement might not mean a lot to you, unless your ideal first home is over the value of £300,000.
However, if you’re moving up or even down the property ladder – your next move just got a whole lot more affordable.
For those looking to move up the ladder, you now might be able to afford something a little bigger.
And whilst mortgage rates still sit at record lows, there really hasn’t been a better time to move!
Here at Edward Mellor, we help thousands of people make their perfect move every single year.
We have experts on hand at every step of your journey to make your time with us as smooth and stress-free as possible.
If you’re interested in selling your property, click here to book your free no-obligation valuation.