By now, we’re sure you will have seen that buyers in England and Northern Ireland are enjoying a stamp duty ‘holiday’ until March 31, 2021.
Chancellor Rishi Sunak announced on July 8 that buyers will pay no stamp duty on the first £500,000 of property purchases until that date, as the government attempts to kick start the property market following the coronavirus pandemic.
But what is stamp duty and what does the stamp duty ‘holiday’ mean for you as a buyer?
What is stamp duty?
Stamp duty is the tax paid on property purchases in England and Northern Ireland.
The tax is different in Scotland, where it is called Land and Buildings Transaction Tax, and in Wales, where it is called Land Transaction Tax.
Who pays stamp duty? The buyer or seller?
Buyers are required to pay stamp duty.
However, in the case of new build homes, often developers will foot the bill as an incentive for buyers.
Stamp duty holiday: The new rules explained
Under the government’s stamp duty ‘holiday’, buyers between now and March 31, 2021 will pay no stamp duty on the first £500,000 of a property’s purchase price – unless that buyer already owns a UK property.
Buyers purchasing a second home or landlords buying an investment property will still have to pay the 3% stamp duty surcharge introduced by the government in 2017, although these buyers, alongside most others, still stand to make substantial savings.
Under the previous rules, stamp duty was payable on all purchases above £125,000, unless you were a first-time buyer in which case the first £300,000 of a purchase was exempt.
The current breakdown of stamp duty charges, since July 8 and until March 31, 2021, is:
• £0 to £500,000 – 0% in stamp duty
• £500,001 to £925,000 – 5% in stamp duty
• £925,001 to £1.5m – 10% in stamp duty
• Amount over £1.5m – 12% in stamp duty
With the 3% surcharge on top, additional home and investment buyers will pay:
• £0 to £500,000 – 3% in stamp duty
• £500,001 to £925,000 – 8% in stamp duty
• £925,001 to £1.5m – 13% in stamp duty
• Amount over £1.5m – 15% in stamp duty
How much money could I save during the stamp duty holiday?
This will depend on your property’s purchase price and whether or not you are buying an additional property.
But anyone buying a property for more than £500,000 under the new rules stands to save £15,000 in stamp duty.
For example, a property costing £550,000 would have commanded a stamp duty bill of £17,500 under the old rules.
Now, that same property will cost you just £2,500 in stamp duty – a saving of £15,000.
Investors and buyers of second homes
An investor, who already owns at least one property, buying that same property for £550,000 would have been facing a stamp duty bill of £34,000 under the old rules.
Now, they would have to pay £19,000 – a saving of £15,000.
If you’re a first-time buyer, you were already exempt from stamp duty on the first £300,000 of a property’s purchase price, so unless you are buying a home costing more than that, you’ll see no change to your stamp duty bill.
However, a property costing £350,000, for example, would have previously cost a first-time buyer £2,500 under the old stamp duty rules.
Under the new rules, that £350,000 property for a first-time buyer will be free of stamp duty – a saving of £2,500.
Stamp duty for international buyers
Overseas buyers in England and Northern Ireland currently pay the same stamp duty rates as homegrown buyers.
However, in his announcement on July 8, the Chancellor confirmed a 2% stamp duty surcharge on overseas buyers would come into force in April 2021.