Stamp Duty Relief
After several months of being in lock down without being able to move or attend viewings, it will have come as a relief to many purchasers to learn of the Chancellor, Rishi Sunak’s, announcement on Wednesday that the threshold for the payment of Stamp Duty Land Tax (stamp duty) has been temporarily increased to £500,000.00 up until 31 March 2021.
Stamp duty is a tax paid by anyone who purchases a property in the UK. Previously, there were different rates across England and for certain types of buyers but from 08 July 2020, any person or persons wishing to purchase a new property in England and Northern Ireland to use as their main residence (be it a first time buyer or a seasoned home mover) will not pay any stamp duty on the first £500,000.00 of the purchase price.
As an example, a purchaser wishing to purchase a property for £390,000.00 would previously have had to pay £9,500.00. However under the new guidelines, the stamp duty payable is now £0, a huge financial saving. This also applies to those people purchasing a new leasehold property up to £500,000.00. For those purchasing for more than £500,000.00 there are savings also as you will only be taxed on the amount over £500,000.00 on a sliding scale. As an example, a purchaser who has agreed a purchase price of £715,000.00 prior to 08 July would have paid £25,750.00 in stamp duty. The same purchaser will today pay £10,750.00, a saving of £15,000.00.
Those people who are not replacing their main residence and are purchasing a property to let out or for use as a second home will still be required to pay the higher rate of stamp duty at 3% up to £500,000.00, but, the new rules mean this is not now paid on top of the standard rate of stamp duty since there is the new zero relief up to £500,000.00. Those purchasers will therefore also incur a financial saving.
As an example, someone purchasing a second home for £250,000.00 would have previously had to pay stamp duty at £10,000.00, which includes the higher rate stamp duty land tax portion. From 08 July, however, the stamp duty payable would just be the higher rate portion of £7,500.00, a saving of £2,500.00.
This news today is very much welcomed by home buyers across England and will be an instant saving for those that are completing after 08 July until 31 March 2021. Sarah Ford, Senior Associate Solicitor and Head of Residential Property says “we very much anticipate a sharp rise in those people now looking to purchase a property and hopefully a busy summer period to get the economy moving once again. If you have been thinking about moving properties whilst in lockdown, now may be the best time to start looking for that new idyllic property whilst being able to potentially make a huge financial saving on stamp duty” . For those looking to move, or if you wish to discuss the stamp duty changes further, please do not hesitate to contact a member of our residential property team, in any of our offices, by calling 0800 652 8373.