STAMP DUTY CHANGE BENEFITS

Monday 28th of September 2020

The Chancellor Rishi Sunak has confirmed a major stamp duty cut in a bid to boost the housing market. Speaking at the summer economic update, Sunak revealed plans to raise the stamp duty threshold from £125,000 to £500,000 in England and Northern Ireland. 

The stamp duty holiday will start immediately and run until 31 March 2021 meaning that until that time, nearly nine out of 10 house purchase transactions will no longer be subject to stamp duty.  This means that In London and the South East buyers could save up to £14,999.

Here’s how the stamp duty holiday could impact you.

What is stamp duty?

Buyers must pay stamp duty when buying a home or piece of land worth £125,000 or more in England and Northern Ireland. It is charged on a tiered basis (so you only pay the higher rates on the slice above any threshold – the same as income tax). 

These are the rates:

  • Up to £125,000: 0%
  • On the portion from £125,001 to £250,000: 2%
  • On the portion from £250,001 to £925,000: 5%
  • On the portion from £925,000 to £1.5m: 10%
  • Above £1.5m: 12%

There are exemptions available for first time buyers, who don’t have to pay stamp duty on the first £300,000, so long as the home doesn’t cost more than £500,000. 

Meanwhile, people buying additional property for £40,000 or more, such as second homes, pay an extra 3% of stamp duty on top of regular stamp duty rates. The surcharge effectively works as a slab tax. In other words, the 3% loading applies to the entire purchase price of the property.

So how will the stamp duty holiday work?

The chancellors new measure means that buyers will only start to pay stamp duty on property above £500,000. This will be for people buying their first home, or moving up or down the housing ladder.

These are the new holiday rates:

  • Up to £500,000: 0%
  • On the portion from £500,001 to £925,000: 5%
  • On the portion from £925,001 to £1.5m: 10%
  • Above £1.5m: 12%

The 3% stamp duty surcharge will apply on top of the new holiday rates, so people buying additional homes will attract a 3% stamp duty bill on the first £500,000 of property. This will still result in a saving, because the 3% rate previously applied on the first £125,000, with higher rates above that.

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