Stamp duty holiday: What is it and how will it work?
At the start of July, the chancellor Rishi Sunak announced a temporary holiday on stamp duty on the first £500,000 of all property sales in England and Northern Ireland.
The housing market has been on pause because of coronavirus so the stamp duty holiday has been introduced in the hopes of boosting the property market.
What is stamp duty?
Stamp duty is a kind of tax. It is paid by people buying properties and the amount you pay depends on where you are in the UK and the price of the property.
The government has temporarily increased the stamp duty threshold to £500,000 for property sales in England and Northern Ireland, until 31st March 2021. That means, anyone buying property up to £500,000 between 8th July 2020 and 31st March 2021 will not pay any stamp duty, and more expensive properties will only be taxed on their value above that amount. If you are buying a £500,000 property this could save you £15,000.
How much do you have to pay?
If the property you buy is your main home you won’t pay any stamp duty on it at all if it costs £500,000 or less.
The next portion of the property’s price (£500,001 to £925,000) will be taxed at 5%, and the £575,000 after that (£925,001 to £1.5 million) will be taxed at 10%
The remaining amount (over £1.5 million) will be taxed at 12%.
Before the announcement, stamp duty in England and Northern Ireland was paid on land or property sold for £125,000 or more, while first-time buyers did not pay any stamp duty up to £300,000.
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Who does this help?
Before the newly introduced stamp duty holiday, if you bought a house for £275,000 you would have paid £3,750 on stamp duty.
The stamp duty holiday will mean significant savings for some buyers at the lower end of the housing market in particular, but others will see little to no change. For example, first-time buyers purchasing a home in England or Northern Ireland for up to £300,000 have been exempt from this property tax since 2017. This helped around 214, 000 buyers in 2018/2019.
Stamp duty is payable on all homes up to £500,000 but this highlights a huge geographical difference. Buyers in London and the South East paid 72% of all receipts in 2018/2109 because on only 5% of sales was this tax not applicable. Whereas in parts of the north of England, more than 40% of sales were not liable for stamp duty.
To conclude it would largely be people in London and South East and then parts of the Midlands who would benefit most from the stamp duty holiday.
Things to note
- This stamp duty holiday replaces the first-time buyer discount.
- Anyone completing a property sale before the 8th July, even on the 7th July will have to pay normal stamp duty.
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