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Finance
8 Jul 2020

Stamp Duty Holiday: How Will It Work For You

mohammed
mohammed

Chancellor Rishi Sunak has announced a temporary holiday on stamp duty on the first £500,000 of all properties for sale in England and Northern Island. This temporary stamp duty holiday will run until 31 March next year and the change will take place immediately. This means that new homeowners will not have to pay stamp duty on a property as long as the deal is completed before 31 March 2021.

The recent changes will also benefit second home buyers or buy-to-let properties, although they're still liable to pay the extra 3% duty due on the entire price of the property.

The recent announcement put into place in a bid to help boost the struggling housing market which has taken a huge hit due to the coronavirus pandemic. Predictions indicate that the average stamp duty bill will fall by £4,500 and nearly 9 out of 10 people of those looking to buy a home will pay no stamp duty at all.

The temporary measures are expected to have a potentially lasting impact on those looking to purchase a home at the lower end of the market. 

What is stamp duty?

Stamp Duty was first introduced in December 2013 and applies to people looking to buy a property or land over a certain price within England and Northern Island.

Before the temporary measures were announced, the previous threshold meant properties costing over £125,000 were liable for the tax, although the 2017 Budget abolished Stamp Duty for first-time homebuyers in England and Wales purchasing homes up to the value of £300,000.

What is the case in Wales and Scotland?

Wales and Scotland have their own arrangements.

How much would a buyer save?

Under the new temporary measures, a new buyer in England or Northern Island could save thousands, although this depends on the purchase price of the house. For example, if you buy a property for £450,000 and you’re a first-time buyer, you would usually pay £12,500 ( made up of £2,500 on the first £125,000 and £250,000, and £10,000 on the portion between £250,001 and £450,000). But for now, you have nothing to pay on stamp duty, meaning you would save a staggering £12,500. As a general rule, the more you pay under the new £500,000 threshold, the more you will save on stamp duty. Buying a property at the value of £500,000 under the new temporary measures will see a saving of £15,000. 

Experts have predicted the average saving will be £4,500 under the new temporary measures. 

What impact does this have on homeowners looking to sell?

Experts have said this stamp duty holiday will encourage more homeowners to move, which would kickstart the housing market. 

How much does stamp duty raise?

Currently, the government's annual take from stamp duty is £12bn, according to recent figures released by HM Revenue and Customs (HMRC). This roughly equates to the equivalent to 2% of the Treasury’s total tax take.

Use our stamp duty calculator to find out how much stamp duty you currently have to pay.

What will be the impact on the housing market?

This is not the first time the government has announced a temporary measure on stamp duty to help kick-start the economy.

In December 1991, the stamp duty threshold was raised from £30,000 to £250,000 for 8 months by the Conservative Chancellor Norman Lamont. This measure was announced during the recession which saw the number of home sales double according to research.

This change is aimed at buyers that have been impacted financially by the coronavirus pandemic. Experts predict the change to the stamp duty threshold would provide a further boost to demand for housing. The additional savings will feedback into the economy, meaning more cash spent on home improvements or increased budget on mortgages. The temporary measures announced by the government are expected to encourage more people to think about buying a house to get on the property ladder.

For further help and advice on buying a property get in touch and speak to one of our expert brokers.

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