In his 8 July summer statement, Chancellor Rishi Sunak confirmed that the stamp duty threshold will be immediately raised to £500,000 in England and Northern Ireland, in what some have dubbed the ‘stamp duty holiday’. The rise in threshold lasts until 31 March 2021 and will apply to both first-time buyers and previous owners.
Stamp duty is a tax you have to pay if you buy a property or a piece of land in England or Northern Ireland. Buyers in Scotland pay Land and Buildings Transaction Tax (LBTT) and in Wales Land Transaction Tax (LTT) instead of stamp duty.
The property website Rightmove said traffic to its listings increased by 22% immediately after Sunak’s announcement, an indication that this could be the stimulus for many to come to a decision about moving home.
The move comes in response to the current economic crisis. Many are worried that the housing market will stagnate in the current economic climate. Lockdown measures put sales on hold and prevented work on construction sites. The number of transactions was down by 50% in May.
Stamp duty will be collected at a rate of 5% on transactions over £500,000. For instance, if you bought a house for £575,000, you would pay 0% on the first £500,000 and 5% on the final £75,000. Overall, you would pay £3,750 in stamp duty.
What about buy-to-let and second homes?
The stamp duty cut will also apply to those buying second homes and buy-to-let properties, allowing investors to make savings. However, the 3% surcharge for buying additional properties will apply to the new stamp duty rates.
So, property investors spending less than £500,000 would only need to pay 3% on top of the purchase, as opposed to the previous 5%.
The housing market has responded well to the rise in threshold. It frees up larger properties for families, which they previously may not have been able to afford, and it could help first-time buyers onto the property ladder.
It’s widely expected that the stamp duty holiday will have an immediate impact on the volume of sales agreed in the coming weeks. Please get in touch if you’d like to know more about how the ‘stamp duty holiday’ will affect you.