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Great News For Homebuyers as Stamp Duty Holiday is Announced

stamp duty holiday announced

In a bid to give a boost to the property market and mitigate the economic crisis caused by COVID-19, earlier this year Chancellor of the Exchequer Rishi Sunak announced that homebuyers will not pay stamp duty on homes costing up to £500,000. The stamp duty holiday is scheduled to end on 31 March 2021.

What is stamp duty?

Stamp duty is a tax paid by people buying a property or piece of land. In England and Northern Ireland, buyers are liable to pay Stamp Duty when purchasing a residential property, or piece of land costing more than £125,000. This tax applies to both freehold and leasehold properties, whether you are purchasing outright or with a mortgage.

The rate you pay depends on the property type, price and whether you are a first-time buyer. Exemptions apply for first-time buyers, who don’t have to pay stamp duty on the first £300,000, as long as the property doesn’t cost more than £500,000.

Who pays stamp duty and how much?

  • In England and Northern Ireland, stamp duty is paid on land or property sold for £125,000 or more.
  • You pay nothing on properties purchased for up to £125,000.
  • 2% on a property between £125,000-£250,000.
  • 5% on a property between £250,000-£925,000.
  • 10% on a property between £925,001-£1.5m.
  • 12% on any property valued over £1.5m.
  • The rate you pay depends on the property type, price and whether you are a first-time buyer.

For example; someone spending £248,000 – the average cost of a house – would pay £2,460 (2%) in stamp duty.

What has changed & how will it work?

  • The government has increased the lower stamp duty threshold to £500,000 for property sales in England and Northern Ireland, this will come into effect immediately.
  • This means that any property purchased below the new level will not need to pay stamp duty, as long as the deal is completed before March 31st 2021.
  • These rates apply whether people are purchasing their first home, or moving up or down the property ladder.
  • The change is aimed at helping those who have taken a financial hit because of the coronavirus crisis.

Mr Sunak stated:

“uncertainty bounds the market- a market we need to be thriving, we need people to feel confident”

 “the average stamp duty bill will fall by £4,500 and nearly nine out of 10 people buying a main home this year, will pay no stamp duty at all”

How much can a buyer save?

  • The more you pay – (up to the new £500,000 threshold) the more you can save on stamp duty costs.
  • Before the stamp duty holiday, if you purchased a home for £275,000, the stamp duty costs you’d pay would be £3,750. This figure is based on 0% duty on the first £125,000, 2% on the next £125,000 (£250,000) plus 5% on the final £25,000 (£1,250)

Who will benefit from the stamp duty holiday?

The stamp duty holiday is great news for buyers, estate agents and developers after the property market was bought to a halt by the coronavirus crisis. Rishi Sunak’s move will benefit those buyers at the lower end of the housing market, allowing for significant savings. Others, for example, first-time buyers will see no change, as they have been exempt from this property tax since 2017, which helped around 214,000 buyers purchase a property in 2018/19.

  • Sales that are exempt from stamp duty have gone up from 16% to 89% – up 73%
  • This change is estimated to save homeowners a total of £3.8 billion
  • Now, 9/10 transactions will no longer pay stamp duty

What will happen to house prices?

The chancellor acknowledged that prices had taken a fall since the coronavirus crisis. Fuelling demand without adding to supply should mean that prices do not crash. The money saved by buyers on Stamp Duty costs can go towards property offers leading to an increase in parts of the country where the market is busy.

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