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Impact of Stamp Duty Holiday on House Purchases
14 July, 2020 2 minutes reading time
Confirmation of the much talked about ‘stamp duty holiday’ was announced on 8 July in Rishi Sunak’s ‘Summer Economic Update’ on all property sales in England and Northern Ireland. Along with temporary VAT cuts for pubs, restaurants and cafes, the measure is aimed at stimulating the UK housing market. And the changes are introduced with immediate effect. But how will this work in practice and what impact is it likely to have?
Stamp Duty Land Tax
Stamp Duty Land Tax (SDLT) is the tax paid by those who buy a property or a piece of land above a specific value. Having a mortgage (or not) does not affect SDLT. And property tax varies across the UK. In Scotland, it’s known as the Land and Buildings Transaction Tax. Buyers in Wales pay Land Transaction Tax if the sale is completed on or after the beginning of April 2018.
What’s New?
Before the announcement, the SDLT threshold was £125,000 for residential properties and £150,000 for non-residential land and property. First-time buyers received relief on the first £300,000 of SDLT for properties costing up to £500,000. Additionally, buyers of second homes or buy-to-let properties paid an extra 3% stamp duty on top of the standard rates.
From 8 July 2020 until 31 Mar 2021, the SDLT threshold in England and Northern Ireland. has been increased to £500,000. For properties sold above this figure, tax will only be applied to the value above £500,000. According to government figures, this will mean almost 90% of those buying a house this year will benefit from paying no SDLT at all.
SDLT Comparison
Freehold Purchase Price | Old Rate | Temporary Rate 8/7/2020 - 31/3/2021 |
---|---|---|
£100,000 | £0 | £0 |
£200,000 | £1,500 | £0 |
£300,000 | £5.000 | £0 |
£400,000 | £10,000 | £0 |
£500,000 | £15,000 | £0 |
£600,000 | £20,000 | £5,000 |
£700,000 | £25,000 | £10,000 |
£800,000 | £30,000 | £15,000 |
£900,000 | £35,000 | £20,000 |
£1,000,000 | £43,750 | £28,750 |
£1,100,000 | £53,750 | £38,750 |
£1,200,000 | £63,750 | £48,750 |
£1,300,000 | £73,750 | £58,750 |
£1,400,000 | £88,750 | £68,750 |
Under the new regulations, those who buy a second property, or a buy-to-let property will pay an additional 3% tax on top of the new temporary rates set out above. This means buyers who pay more than £125,000 for a second home will benefit from the SDLT holiday.
The SDLT rates will revert to the pre-holiday rates (as above) on 1 April 2021. Furthermore, the pre-holiday rates also apply unless you completed your house purchase after 8 July 2020.
Help or Advice
For further information or advice about the changes to Stamp Duty and how it may affect you, or for any other residential property issue, please contact us. We’re here to help.
Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.