After all the waiting and whispers, Chancellor Rishi Sunak has confirmed stamp duty changes to take place with immediate effect. The change has been introduced to revive the property market and help kick-start the economy. Billed as a stamp duty ‘holiday’ as it will last until 31st March 2021, it sees the threshold for stamp duty tax raised to £500,000.
Temporary level increase
Starting immediately and running until 31st March 2021, home buyers will no longer need to pay stamp duty tax on any property purchase of below £500,000. This applies to property sales across England and Northern Ireland where buyers pay Stamp Duty Land Tax. Prior to this, the level for home buyers to pay stamp duty was £125,000. This is welcome news for those looking to buy brand new, especially those keen to buy a new, good-sized family home.
Significant savings for homebuyers
Looking at the figures before the chancellor’s announcement, home buyers would have been expected to pay £15,000 stamp duty tax on a £500,000 home. Of course, this has been different for first-time buyers for some time. The level at which first-time buyers start paying stamp duty tax was raised to £300,000 a few years back.
For properties between £300,000 and £500,000 the stamp duty tax before the temporary changes was 5%. For anyone who had been hoping to buy or get on the property ladder for the first time this year, this extra saving through the increased stamp duty tax threshold to £500,000 will be extremely helpful.
For properties over £500,000
In some areas of the country, there is a good proportion of new build homes coming in over the £500,000 threshold. The good news here is that, for homes priced up to £925,000, buyers will pay 0% stamp duty tax on the first £500,000. They will then pay 5% on the remaining sold price of the property. This increases to 10% for homes up to £1.25 million, and to 12% for homes that cost more than £1.5 million.
If you compare this to before the chancellor’s changes, 0% stamp duty tax was payable on homes under £125,000 (with the exception of first-time buyers where the threshold was £300,000), going up to a rate of 5% for homes priced between £250,000 and £925,000.
Under the new temporary revised stamp duty threshold, if you buy a property for £750,000, the stamp duty will come down from £27,500 to £12,500, making a saving of £15,000.
Property completion is due
As long as you have not yet completed your property sale, you will benefit from the stamp duty ‘holiday’ exemptions as the changes took place with immediate effect. The stamp duty tax cut applies from Wednesday 8th July, so anyone completing a property sale in England and Northern Ireland, from this date until 31st March 2021, will benefit.
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