The chancellor has announced temporary changes to stamp duty to help cut costs for anyone buying a home during the COVID-19 pandemic. Here's what it means for you.
As things change rapidly during the coronavirus (COVID-19) crisis, this guide will be updated regularly to reflect changes in rules and regulations.
In a bid to help home buyers struggling during the coronavirus (COVID-19) pandemic the chancellor has announced a change to the level at which the stamp duty is charged.
When you buy a residential property, or land in England or Northern Ireland you are charged a tax known as stamp duty. The tax applies to both freehold and leasehold properties regardless of whether you’re buying outright or through a mortgage.
Those buying property in Scotland pay Land and Buildings Transaction Tax (LBTT) and in Wales Land Transaction Tax (LTT) instead of stamp duty.
Stamp duty is charged based on several bands based on the purchase price of your property. Currently, home buyers do not pay stamp duty on the first £125,000, then the rate goes up in stages as shown below:
|Purchase price||Stamp duty rate|
|£0 - £125,000||0%|
|£125,001 - £250,000||2%|
|£250,001 - £925,000||5%|
|£925,001 - £1,500,000||10%|
The stamp duty rate only applies to the part of the property price falling within each band.
This means that if you bought a property valued at £300,000, the stamp duty would be calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £50,000 = £2,500
The new stamp duty holiday raises the minimum threshold at which stamp duty is charged from £125,000 to £500,000.
This means that the first home buyers will not have to pay any stamp duty on the first £500,000 of the purchase price.
The new stamp duty bands for the duration of the stamp duty holiday will be as follows:
|Purchase price||New stamp duty rate|
|£0 - £500,000||0%|
|£500,001 to £925,000||5%|
|£925,001 to £1.5m||10%|
You can use Bankrate's stamp duty calculator to find out how much stamp duty you'll likely have to pay based on the purchase price of your home.
First time buyers were already exempt from paying stamp duty for the first £300,000 of the purchase price. So most home buyers will be unaffected unless they buy a property over £500,000.
The stamp duty holiday will go into effect from 8 July 2020 and was initially set to last until 31 March 2021. On 24 February 2021 it was reported that the measures would stay in place until "the end of June".
The stamp duty holiday will start applying from 8 July 2020 onwards. Unfortunately, if you completed a purchase before that date you'll still have to pay stamp duty based on the original rates and thresholds.
People buying second homes, or buy to let properties will be eligible to benefit from this change, however, they will still have to pay the 3% extra duty for second homes on the full purchase price.
How much you can save will depend on the price of the property you buy. The more your pay up to the £500,000 threshold, the more you'll save.
For example, if you buy a house for £350,000, you'd originally pay £7,500 in stamp duty. With the new stamp duty in place, you won't have to pay any stamp duty at all.
According to Chancellor Rishi Sunak, the average stamp duty bill should fall by £4,500, with 90% of home buyers expected to pay no stamp duty at all.
The last time a stamp duty holiday was introduced was following the financial crisis in 2008. The then Chancellor Alistair Darling temporarily suspended stamp duty for properties costing less than £175,000 for a year.
If you're a first time buyer or looking to move house or remortgage, we can help you find the best mortgage deal to suit your needs.