STAMP duty has been scrapped on properties up to £500,000 from July 8.
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Homebuyers temporarily won’t have to pay stamp duty on property worth up to £500,000Credit: Getty – Contributor
The holiday will run until the end of March and will be applied to all residential purchasers, including first-time buyers, second-steppers and those who are looking to downsize.
But Brits who are buying additional properties, for example buy to let, will have to pay the usual 3 per cent surcharge on properties below £500,000.
What was announced in the mini-Budget?
CHANCELLOR Rishi Sunak has announced a £30billion “plan for jobs
The changes were announced in what’s been described as a “mini-Budget” following the coronavirus.
Here’s what the Chancellor announced:
The move will enable some homes at the lower end of the London housing market to become exempt from stamp duty but crucially it will apply to hundreds of thousands of properties in the crucial “Blue Wall” seats that handed Boris Johnson his huge 2019 election win.
Here’s everything we know so far about the stamp duty holiday.
When will the holiday start?
The stamp duty holiday will come into effect immediately, Mr Sunak confirmed on July 8.
This will be a temporary measure running until March 31, 2021.
In fact, details published shortly after the announcement revealed that the relief would be backdated by a few hours to apply to purchases made from midnight on Budget day – November 22, 2017.
The following year he extended the relief to include first-time buyers who purchased a shared ownership property, which could be backdated to November 22, 2017.
There is no suggestion that the Chancellor will backdate this latest stamp duty holiday.
What’s the threshold for buying a new property?
Buyers are charged two per cent of the value of the home that’s worth between £125,001 and £250,000, and five per cent above this up to £925,000.
On July 8, the Chancellor announced that the tax-free property threshold will be raised to £500,000 for all homebuyers.
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 July 8 all house buyers in England and Northern Ireland had to pay stamp duty on properties over £125,000.
But Mr Sunak confirmed it will be hiked to £500,000 for residential properties with immediate effect.
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 two per cent if it is worth between £125,001 and £250,000
- You pay five per cent if between £250,001 and up to £925,000
- You pay ten 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:
- three per cent on purchases up to 125,000
- five per cent on purchases between £125,001 and £250,000
- eight per cent on purchases above £250,001 and £925,000
- 13 per cent on purchases above £925,001 and £1.5million
- 15 per cent on purchases above £1.5million
Currently, average property prices sit at £237,616, according to Halifax, so the temporary relief would mean that the majority of buyers won’t have to pay it.
But Mr Sunak said the average stamp duty bill will fall by £4,500.
Nearly nine out of ten people buying a main home this year will pay no stamp duty at all, he added.
How will it affect first-time buyers?
First-time buyers are already exempt from stamp duty on property worth up to £300,000.
They are then charged at a rate of five per cent on the portion of the value of the property between £300,000 but less than £500,000.
The changes will only affect those who are buying a property worth more than £300,000 as they will no longer have to pay the tax on the portion that’s worth up to half a million pounds.
If a first-time buyer purchases a property for £500,000 ahead of March 31, they’ll save £10,000 in stamp duty costs.
Has there been a stamp duty holiday before?
This isn’t the first stamp duty holiday the government has introduced to kick start the economy.
In December 1991, Conservative chancellor Norman Lamont announced that the threshold for stamp duty would be raised from £30,000 to £250,000 for eight months.
The move was seen as a way to counter a slump in the housing market during the recession, and saw the number of home sales double, Homes and Property reports.
And in 2008, the then Chancellor Alistair Darling temporarily suspended Stamp Duty for a year for properties costing less than £175,000.
But it didn’t result in the boost for first-time buyers as they had hoped – pushing up property prices by 0.7 per cent.