The announcement yesterday from the Chancellor Rishi Sunak about changes to Stamp Duty may have you asking lots of questions about what this means for you. So, we’ve pulled together the information you need and broken it down for you.
What is Stamp Duty?
Stamp Duty (or Stamp Duty Land Tax for it’s full name) is a tax, or payment, that you make to the government when you purchase a residential home or land in the UK. There are currently varying rules as to how it applies and what rates you pay, depending on where you are in the UK. England and Northern Ireland follow one set of guidelines, while Scotland and Wales determine follow independent rules.
The amount you pay depends on the value of the property and is usually set as a percentage of the price you pay, and whether you are buying your first home, moving house, or buying additional property as a holiday home or a rental.
What are the changes?
The announcement yesterday from the chancellor means that there will effectively be a “holiday” (a period of time where you don’t have to pay Stamp Duty) until the 31st March 2021 for anyone purchasing a house under £500,000. This is for both First Time Buyers and people moving home.
How much will this save me?
This depends on if you are a first time buyer or moving home. If you were first time buyer, buying a house for £250,000, then you won’t have paid Stamp Duty anyway if you lived outside of London, as you aren’t required to pay stamp duty as first time buyer on a house under £300,000 already. (The limit is £500,000 for first time buyers in London)
If you already owned a house and were just moving, until the 8th July 2020 you would have paid £2,500.
Under the new holiday allowance, you now won’t pay that – saving you £2,500 on your overall costs of moving house.
If you’re purchasing a house that costs £600,000 for example, you will now pay just the 5% rate on any amount over £500,000. So, in this example, your Stamp Duty will be £5,000, saving you £15,000.
What about Buy To Let and Second Homes?
There’s some good news here for Landlords and Holiday Home owners as well. Under the previous guidelines, you pay normal rates of Stamp Duty plus an additional 3%. So, a house price under £125,000 would have paid 0% (standard) plus 3% additional rate.
Let’s use an example:
If you buy a property to rent out and you put it for £100,000, you will have paid the zero rate plus 3% – meaning you’ll pay £3,000.
As the additional rate still applies, purchases under £125,000 won’t see any change, where as if you bought an additional property for £250,000, under the previous guidelines you will have paid £9,250 (£3,000 on the first £125,000, plus £6,250 on the next £125,000).
Under the new holiday, you’ll simply pay 3% on any purchase up to £500,000 as the underlying rate is now zero. So, if you bought a second home or rental property, you’ll now pay £7,500, saving you £1,750.
So what does it all mean?
In short, this means for the vast majority of people, moving home or purchasing your first home just became a little cheaper, and a little less complicated. Rachael Gent, Managing Director at Gent Law said “The announcement has come at just the right time for many home movers and first time buyers. It’s aim to stimulate the property market will hopefully have the desired effect. It simplifies matters as there is no difference between First Time Buyers or Home Movers- the first £500k is simply tax free until 31st March 2021”.
If you need more information you can always contact us directly at the office on 0345 094 1567 or by logging on to our website, however you may want to check out the government’s official website on Stamp Duty
You can also speak to our legal team at Gent Law