What is Stamp Duty?
Let’s start from the beginning “What is Stamp Duty?”. Stamp duty is a ‘tax‘ you pay when you buy a residential property or piece of land that costs more than £125,000. This applies even if you are getting a mortgage or are able to buy it outright! From today, up until March of next year (2021), that is all about to change. If you’re about to buy a home up to the value of £500,00 you won’t have to pay that tax! This leaves you free to spend that money on something much more exciting…. like decorating your new home!
With the country’s economy starting to suffer due to the impact of the coronavirus, this week the chancellor, Rishi Sunak, has announced a temporary halt to stamp duty, a “Stamp Duty Holiday” if you like. It is welcome news to the property industry and to those looking to buy; especially first-time buyers (See our first time buyers tips).
Effective immediately, the government has cut stamp duty on homes up to £500,000 until March 2021 in a bid to help boost Britain’s struggling housing market. So, how is this different?
Stamp Duty Holiday how will it work?
Up until now homebuyers have had to pay stamp duty on properties that are worth more than £125,000. With the price of stamp duty increasing in percentage bands depending on what the property is worth. But these latest changes have seen the chancellor raising these values in order to encourage more house sales.
Today, the chancellor, Rishi Sunak has said:
“The average stamp duty bill will fall by £4,500. And nearly 9 out of 10 people buying a main home this year, will pay no stamp duty at all.”Rishi Sunak – House of Commons – 8th July 2020
How Will I Be Affected As A First Time Buyer?
In short, it depends on how much the property you want to buy is worth. First-time buyers are already exempt from paying stamp duty on properties worth up to £300,000. This new stamp duty ‘holiday’ means that if you were to purchase a house that was more than £300,000, you still wouldn’t have to pay stamp duty! Good news for those who felt limited to what they could spend up until now!
When Will This All Be Happening?
Rishi Sunak announced that this holiday applies from today (8th July 2020), lasting until 31st March, 2021. Any properties that were completed on before July 8th will have been subject to the previous stamp duty charges.
What Has Prompted This Policy?
In a nutshell, it’s the fact that when lockdown began in March and estate agents and buyers could no longer visit properties, the housing market was brought to a grinding halt. House prices began to fall, and figures released from the HMRC show that 50% LESS properties were sold in May of this year; compared to the same time last year.
And it’s not set to get better any time soon. With people losing their jobs as the economy gets worse, the demand for homes is expected to fall even further. This is expected to continue into the summer and into autumn.
Those in the know have predicted that the impact the lockdown has had on people’s incomes will affect the housing market for the rest of the year. Some economists predicting that house prices could fall by up to 13%!
So How Will a Change Boost The Market?
The introduction of a halt on stamp duty will impact in two key ways:
- From the autumn, potential homebuyers are set to save a ton of money.
- Buyers initially planning to buy a home next year will be encouraged to buy within a 6 month period instead.
This increase in house transactions will boost the property market, as well as benefiting the wider economy.
How much will i save on stamp duty?
Well, the more you spend – up to £500,000 – the more you will save.
For example, if you’d bought a house last week (or yesterday for that matter!) that’s worth £275,00. You would have had to pay £3,750 in stamp duty. Today you would pay nothing!
This is great news if you’ve been thinking about buying, but the extra cost of stamp duty has put some properties out of your price range. Now have until the end of March 2021 to realise your dream, at a bargain price!
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