Stamp duty is a lump-sum tax that anyone buying a property or land costing more than a certain amount must pay. The rate at which you’ll pay the tax varies depending on the price of the property and the type (i.e. residential or commercial). While often referred to as stamp duty, that’s only the name in England and Northern Ireland – it’s different in Scotland and Wales, where it’s known as ‘land and buildings transaction tax’ and ‘land transaction tax’ respectively.
In the latest announcements from the Government, to offset the effects of Coronavirus, Rishi Sunak, Chancellor of the Exchequer, announced on the 8th of July that home movers will be able to take advantage of a Stamp Duty holiday until March 2021.
What exactly does this mean?
ith the threshold on Stamp Duty being raised to homes under £500,000, there’s the real possibility of being able to save up to £15,000 in tax off your purchase. This will apply whether you’re a first-time buyer or have previously owned a property and is effective across England and Northern Ireland until the 31st March 2021. At the current time it’s understood that neither Wales nor Scotland will replicate the stamp duty reduction for the equivalent there.
The Stamp Duty holiday will enable buyers to add a little extra to their budget, use the extra money to put away for a rainy day or a holiday next year when hopefully travel restrictions and quarantine rules are more relaxed or have disappeared or make it easier to move, spending the money on removals and decorators. The Government is expecting to see increased spending in the home interiors industry, as many people will be able to make those extra splurges, that they might not have been able to before.
Examples of savings can be seen in the table below.
| Property Value | Old Rates | New Rates | Saving |
|---|---|---|---|
| £100,000 | £0 | £0 | £0 |
| £200,000 | £1,500 | £0 | £1,500 |
| £300,000 | £5,000 | £0 | £5,000 |
| £400,000 | £10,000 | £0 | £10,000 |
| £500,000 | £15,000 | £0 | £15,000 |
| £600,000 | £20,000 | £5,000 | £15,000 |
| £700,000 | £25,000 | £10,000 | £15,000 |
| £800,000 | £35,000 | £20,000 | £15,000 |
| £900,000 | £35,000 | £20,000 | £15,000 |
| £1,000,000 | £43,750 | £28,750 | £15,000 |
However, if you’re buying a second home, you’ll still pay Stamp Duty on a property costing more than £40,000 at the revised rates – paying an extra 3%.
The nine-month stamp duty holiday will cost the Treasury an estimated £3.8bn. Stamp duty is payable upon completion, so if you’ve exchanged contracts and are currently waiting for completion you will be able to benefit from the change. Unfortunately, if you completed your purchase on 7th July 2020 you cannot apply for a refund. As ever, there will be winners and there will be losers but it is hoped that the Government’s stamp duty holiday will boost the property market and the economy.