BRITS could be set for a stamp duty “holiday” in a bid by Chancellor Rishi Sunak to boost Britain’s housing market.
The temporary measure would remove tax on the purchase of homes of up to £500,000 to help those most in need following the coronavirus crisis.
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Brits could be set for a ‘holiday’ on stamp duty in a bid by chancellor Rishi Sunak to boost Britain’s housing marketCredit: Alamy
It is expected to then be implemented in the autumn budget, which will be delivered this coming October.
But how would a stamp duty holiday work and how long would it last? We explain everything we know so far.
What is stamp duty?
STAMP duty land tax (SDLT) is a lump sum payment anyone buying a property or piece of land over a certain price has to pay.
Until today, July 8, all house-buyers in England and Northern Ireland had to pay stamp duty on properties over £125,000.
The rate a buyer has to fork out varies depending on the price and type of property.
Rates are different depending on whether it is residential, a second home or buy-to-let, or whether you’re a first-time buyer.
The usual system in England for residential properties means:
- First-time buyers pay nothing on properties below £300,000 (and relief available on properties of up to £500,000)
- You pay nothing if the property costs below £125,000
- You pay 2 per cent if it is worth between £125,001 and £250,000
- You pay 5 per cent if between £250,001 and up to £925,000
- You pay 10 per cent if it is between £925,001 and £1.5million
- You pay 12 per cent on anything over £1.5million
For second homes or buy to let properties:
- 3 per cent on purchases up to 125,000
- 5 per cent on purchases between £125,001 and £250,000
- 8 per cent on purchases above £250,001 and £925,000
- 13 per cent on purchases above £925,001 and £1.5 million
- 15 per cent on purchases above £1.5 million
How would a stamp duty holiday work?
Treasury officials are said to be looking at raising the threshold at which homebuyers start paying stamp duty in England and Northern Ireland.
Currently they don’t pay any stamp duty on the first £125,000 of homes, they then typically pay two per cent of the value between £125,001 and £250,000, and five per cent between £250,001 and £925,000.
That would enable some homes at the lower end of the housing market in London to be taken out of stamp duty.
If you’re not eligible for stamp duty relief, you must send a stamp duty land tax (SDLT) return to HMRC and pay the tax within 14 days from the date you completed the purchase of your home.
How long would it last?
The Sun revealed on Saturday that ministers were considering a six-month stamp duty holiday to revive the housing market.
The government hasn’t yet officially announced the measures, so we’ll update this article once we get more details on how it would work.
How would the stamp duty holiday help the economy?
The Treasury hopes that the possible stamp duty holiday will breathe life into the property market after it effectively froze during lockdown with viewings, sales and moves suspended.
Experts say that a stamp duty holiday will encourage more home owners to move, helping to kickstart economic activity in other sectors.
Paul Johnson, director of the Institute for Fiscal Studies, told the Times there was a “good chance” that the policy would benefit the economy in the short term.
He said: “The housing market is very thin…Anything which gets it moving would potentially help”.
This was echoed by Tom Bill, head of UK residential research at estate agency Knight Frank, who told Financial Reporter: “A stamp duty holiday would provide welcome financial relief for millions of people, including first-time buyers.”
How much money would you save?
The average house cost £248,0000 in England in March 2020, according to the Office for National Statistics (ONS).
If you purchased the average house as a first-time buyer, you don’t have to pay any stamp duty thanks to the relief on homes below £300,000.
But if a first-time buyer bought a property for £500,000, you’d save £10,000 in stamp duty if the threshold increased to £500,000, Peter Gettins of mortgage broker L&C Mortgages, told the Sun.
Home movers who bought the average property for £248,000 would save £2,460 on stamp duty if either the £300,000 or £500,000 stamp duty-free threshold is brought in, while Brits buying a second home for the average price tag would save a whopping £9,900.
This assumes the stamp duty holiday will apply to second homes as well as to first-time buyers.
You can calculate how much stamp duty you currently have to pay on the Money Advice Service website.
The government also has a handy calculator that tells you how much you would pay on a property.
On June 30, Boris Johnson announced an affordable housing plan with 30 per cent discounts for first-time buyers.
But one in seven Help to Buy homes lose value despite local house prices soaring, research found in June.
Meanwhile, we explain what’s next for house prices as first-time buyers fear they will be frozen out of the market.