The news we’ve all been waiting for.
In a bid to reinvigorate the economy after the Coronavirus lockdown, Rishi Sunak has announced the threshold for stamp duty will be raised immediately from £125,000 to £500,000, applying to all transactions from the 8th July onwards.
Stamp duty is a tax that buyers pay when purchasing a property, calculated as a proportion of the price of the property. In typical circumstances, a property priced up to £125,000 does not have a stamp duty charge; and those priced above have a stamp duty charge starting from 2% of the property price.
With the new legislation, there will now be no stamp duty to pay for properties under £500,000 in value. The threshold will remain at £500,000 until 31st March 2021, resulting in the average stamp duty bill falling by £4,500. Nearly nine out of ten people buying a home this year will pay no stamp duty at all.
What does this mean for first-time buyers?
This tax holiday replaces the previous discount available to first-time buyers, with which they did not have to pay stamp duty up to £300,000. However, it does mean the possible discount available is even greater, making it the perfect opportunity to make your first purchase whatever the price of the property.
What does this mean for properties over £500,000?
If you’re buying property priced £500,001 to £925,000, stamp duty will be taxed at 5%, but only for the portion over the £500,000 threshold. For instance, a property costing £600,000 now has a stamp duty cost of just £5,000, as stamp duty is only charged on the portion between £500,000 and £600,000. Similarly, properties priced £925,001 to £1.5 million will be taxed at 10%.
What does this mean for landlords or those purchasing a second property?
If your purchase results in you owning more than one property, you will still be eligible for a tax cut but will be liable to pay 3% stamp duty as before. The 3% is now applied only on the amount up to £500,000 – an additional home at a value of £400,000 would have previously cost £22,000 in stamp duty, but with the stamp duty holiday it will be
Mark Ross, Managing Director of Redbrik, commented: “This is fantastic news for buyers, and an announcement we have all been waiting for. I hope this gives buyers and sellers confidence in the market; now is a great opportunity to make the move you might have been delaying, with significant financial benefits for all buyers.”
After such challenging economic times during the UK’s lockdown, the announcement from the Chancellor appears to promise a bright future for homeowners and potential buyers alike. With the benefit running until the first quarter of 2021, the next six months should offer an exciting and hopeful period for anyone looking to move.