In a temporary measure to help boost the property market amidst the coronavirus pandemic, Chancellor of the Exchequer, Rishi Sunak, has raised the the threshold for stamp duty on the first £ 500,000 on all property sales in England and Northern Ireland.
Introduced as part of his recent Summer Statement, this new initiative will start with immediate effect (from July 8th), and runs until next 31 March 2021. Prior to this policy being announced, homebuyers would start paying stamp duty in England and Northern Ireland on property from £125,000, or £300,000 for first-time buyers (if buying a property worth less than £500,000). This will save buyers as much as £15,000, if they are buying a property of £500,000 or more.
The announcement is also a timely boost for the property market, where house prices have fallen for four months in a row. The average stamp duty bill will fall by £4,500, Chancellor Rishi Sunak has suggested, with nearly nine out of 10 people buying a main home this year paying no stamp duty at all.
How will Stamp Duty work now?
From now, if the property you purchase is you main home and it costs less than £ 500,000, you will pay no stamp duty
The next step ranges from £ 425,000 to £ 925,000 and will be taxed at 5%. Therefore, if your property is £600,000, you will pay £ 30,000 in stamp duty.
Step 2 (£ 925,001 to £ 1.5 million) will be taxed at 10%. Therefore, if your property is purchased at £ 1million, you will pay
£ 100,000 in stamp duty.
The final step covers any property over £ 1.5 million, which will now be calculated at 12%.
Previously, anyone purchasing a property would be accountable for tax at the following rates:
All property valued under £ 125,000 would not qualify for stamp duty.
Property priced £ 125,001 - £ 250,000 would be charged at 2%. Therefore, if your property was purchased at £ 200,000 you would pay £4,000 stamp duty.
The next £ 675,000 (£ 250,001 - £ 925,000) would be charged at 5%. Therefore, if your property is £ 600,000 you would pay £ 30,000 (no change).
Properties purchased from £ 925,001 - £ 1.5 million would remain at 10% and over £ 1.5 million at 12%. Therefore no change.
With the average house price in the UK currently positioned around the £ 250,000 mark, this new initiative will save purchasers, on average, £ 5,000.
What if I’ve completed a purchase?
As stamp duty is paid on completion, anyone who has already exchanged contracts and are awaiting completion will be able to benefit from the change.
These measures are unprecedented with HM Revenue and Customs latest figures suggesting the government would usually receive £ 12 billion pounds raised from stamp duty (approximately 2% of total sales). With this nine month hiatus, the stamp duty holiday could see a cost of £ 3.8 billion to the Treasury.