Stamp Duty Holiday – How does it work and what does it mean for you?
The Government’s announcement today granting a Stamp Duty Holiday from now until the end of March 2021 is great news – not just for those looking to buy, but those looking to sell too.
What is stamp duty?
Stamp Duty Land Tax (SDLT) is a lump sum payment which buyers of property or land over a certain price have to pay.
Prior to the Government’s announcement, house buyers in England had to pay stamp duty on properties over £125,000, or if you were a First-Time Buyer, you paid no stamp duty up to £300,000 and then 5% on any portion between £300,000 and £500,000.
If you’d bought a home before, then the rate of stamp duty you’d have to pay would vary depending on the price and type of property you were looking to buy. Essentially, the more expensive the property, the more stamp duty you’d have to pay i.e. 2% on £125,001-£250,000, 5% on £250,001-£925,000, 10% on £925,001-£1.5m, and 12% on any value above £1.5m.
Investor buyers also pay an extra 3% stamp duty when they purchase a buy-to-let property.
The Chancellor’s announcement today, suspending stamp duty on properties up to £500,000 for the next 9 months until 31 March 2021, means that anyone looking to buy a property will potentially save thousands of pounds. The changes are effective immediately and will cut the average stamp duty bill by £4,500, with 9 out of 10 house buyers paying no stamp duty at all.
What does this actually mean if you’re looking to buy?
With the threshold for stamp duty now set at £500,000, it means that if you’re looking to buy a property under that amount, you won’t have to pay any stamp duty tax and can save up to £15,000, depending on the price of the property you’re buying.
For example, if you’re buying somewhere for £275,000, then you’ll save £3,750 in stamp duty to move home. That’s based on 0% stamp duty on the first £125,000, 2% on the next £125,000 (£2,500), plus 5% on the final £250,000 (£1,250).
Similarly, if the property you’re buying is £495,000, then the savings are even greater – a whopping £14,750. That’s based on 0% stamp duty on the first £125,000, 2% on the next £125,000 (£2,500), plus 5% on the final £245,000 (£12,250).
If you’re looking to buy a property over £500,000, then you’ll only pay tax on the difference between £500,000 and the price of the property you’re buying.
What does this mean for those looking to sell?
The Stamp Duty Holiday is great news for sellers – with more people motivated to buy, if you’re looking to move, you’ll have an even greater chance of selling and you’ll benefit from the stamp duty holiday as well when you come to buy your next home.