Is this the news that home buyers have been waiting for?
Yesterday we saw an announcement from Chancellor Rishi Sunak, which revealed a range of new packages to stimulate the economy; a temporary stamp duty overhaul being one of these new changes.
Firstly, what is Stamp Duty?
Stamp Duty is a tax you might have to pay if you buy a residential property or a piece of land in England and Northern Ireland.
If you’re buying a new residential property to use as your main residence, you won’t have to pay stamp duty on properties costing up to £500,000 up until 31 March 2021. This will apply whether you’re a first time-buyer or whether you have previously owned a property.
Properties costing more than £500,000 will pay the current Stamp Duty rate based on the value of the property over £500,000.
This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.
How much is Stamp Duty?
Example
For example, if you buy a house for £600,000, the Stamp Duty Land Tax you owe is calculated as follows:
0% on the first £500,000 = £0
5% on the final £100,000 = £5000
Total SDLT = £5000
This is a saving of £15,000 based on the Stamp Duty rates that were in place before 8th July 2020.
Stamp Duty on second homes
If you’re buying an additional property, such as a second home or certain buy-to-let properties, you’ll still have to pay an extra 3% in Stamp Duty on top of the revised rates for each band up until 31 March 2021.
This increased rate applies to properties bought for £40,000 or more.
Example of a Buy-to-Let purchase:
For example, if you buy a buy-to-let property for £150,000, the Stamp Duty Land Tax you owe is calculated as follows:
0% on the first £500,000 = £0
3% additional property stamp duty charge = £4,500
Total SDLT = £4500
You must have completed your property purchase by 31 March 2021 to qualify for the new revised rates on Stamp Duty. Any purchases completed before the chancellor’s announcement on 8 July 2020 will continue to pay Stamp Duty rates valid at that time.
Olivia Thomas
Director at RF&O Properties