On the 8th of July, the UK chancellor of the exchequer Rishi Sunak announced a ‘temporary holiday on stamp duty’. The changes went into immediate effect and will come into effect on the first £500,000 of all property sales across England and Northern Ireland. The tax threshold has been raised temporarily until next March in an attempt to boost the property market and help home buyers currently struggling financially with the COVID-19 pandemic.
Anyone buying a home worth anything in excess of £500,000 will also benefit from a stamp duty discount of £15,000. According to the chancellor Rishi Sunak, the new changes will mean that around 90 per cent of home buyers across England will now pay no stampy duty whatsoever on their purchase. The average tax saving is estimated to be around £4,500.
This has been met with a somewhat mixed reaction. The stamp duty holiday will cost the Treasury around £3.8 billion (about 0.4 per cent of the total tax take) and comes after four months of decline in house prices, the worst performance in around a decade for the UK property market.
While this is fantastic news for some, others have been left somewhat frustrated by the change. For those planning on purchasing a new property between now and March 31st 2021, the lack of stamp duty will come as a huge relief and mean substantial savings. However, there are those who have pushed through with house buying during the incredibly difficult period over the last few months who feel incredibly dejected and believe that it should be backdated to count home purchases made throughout the coronavirus crisis.
But how will the stamp duty holiday work? Will it affect you? Here at Jordan & Halstead, the team always keeps on top of the latest news and how it might affect our clients. Let’s take a look at some of the big questions surrounding the new measures.
What exactly is stamp duty?
If you’re new to the property market or you have never sold or purchased a property before, the main question you might ask is: what exactly is stamp duty?
Essentially, stamp duty is a tax that people pay when they purchase a new property. This varies across the UK between England, Wales, Scotland and Northern Ireland.
For example, in England and Northern Ireland property buyers pay what is known as stamp duty land tax. In Scotland, it’s called the land and buildings transaction tax, and in Wales it is the land transaction tax.
Stamp duty depends on where in the UK you are buying, as well as the overall price and value of the property. The higher the value of the property, the higher the stamp duty tax.
Rishi Sunak’s summer statement regarding the changes to stamp duty will only affect those home buyers purchasing in England and Northern Ireland.
So how much stamp duty will I actually pay now?
If the property you’re planning on purchasing costs £500,000 or less, then good news: you won’t have to pay any stamp duty tax whatsoever. This is the main function of the new measures, helping those purchasing property by paying no stamp duty.
If, however, you’re purchasing a property worth more than £500,000, then the stamp duty you do pay will be greatly reduced. There are two extra brackets to be considered. If the value of the property you are purchasing is £500,001 to £925,000, then you will be taxed at 5 per cent. Beyond that, properties worth £925,001 to £1.5 million will be taxed at 10 per cent. Any property worth more than £1.5 million will be taxed at 12 per cent.
Before Rishi Sunak’s summer statement, stamp duty in England and Northern Ireland was applied to and paid on any property bought for £125,000 or more. This is apart from first time home buyers, who were exempt from stamp duty up to a property value of £300,000 or more.
I’ve just bought a new property – am I still eligible for the stamp duty holiday?
The stamp duty holiday came into immediate effect upon announcement on the 8th of July. This essentially means that all purchases made on or after the 8th of July will benefit from the stamp duty holiday, while all purchases made before the 8th will have to pay the full and normal stamp duty amount.
Stamp duty is paid upon completion of a sale. This means that if you are approaching the completion of your purchase and have exchanged contracts but are still awaiting confirmation and completion, you will still be able to benefit from the new measures.
This is one of the main reasons that the stamp duty holiday has been met with mixed reactions. Many who had the choice to either postpone or push through with a property purchase during the COVID-19 pandemic will have done so without the benefit of knowing there would be a stamp duty holiday.
As such, this means that those home buyers who did push through and complete their purchase during the coronavirus crisis now find themselves thousands of pounds out of pocket compared to if they had only postponed the purchase a short time. Some have called for backdating when it comes to covering purchases made over the last few months with stamp duty still in effect, but so far there has been no movement on this and it seems quite unlikely.
Get in touch
Want to find out more? Just give us a call today. The team here at Jordan & Halstead is always on hand for a chat, even during this difficult time. We’re committed to continuing to provide our customers and clients with all the advice, guidance and assistance they need to help them through the pandemic. If you need clarification and advice when it comes to stamp duty and your eligibility, get in touch with us for expert advice.