What the new stamp duty holiday means for you

The chancellor has extended the 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.

Share this guide
Model of house with bags of money

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.

UPDATE: On 3 March, 2021 Chancellor Rishi Sunak announced an extension of the Stamp Duty holiday to the end of June 2021. The new rates were initially set to expire on 31 March 2021.

This means that stamp duty will not be charged on the first £500,000 of all sales in England and Northern Ireland until June.

After that, the threshold will be lowered to £250,000 — double its pre-pandemic levels — until the end of September.

What is stamp duty?

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.

How much is stamp duty and who has to pay?

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 priceStamp duty rate
£0 - £125,0000%
£125,001 - £250,0002%
£250,001 - £925,0005%
£925,001 - £1,500,00010%

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

How will the stamp duty holiday work?

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 priceNew stamp duty rate
*£0 - £500,0000%
£500,001 to £925,0005%
£925,001 to £1.5m10%
Above £1.5m12%
* This band will last until 30 June, 2021. After that, the maximum threshold of this band will be lowered to £250,000 until the end of September 2021.

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.

What about first time buyers?

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.

When does it go into effect?

The stamp duty holiday went into effect on 8 July 2020 and was initially set to last until 31 March 2021. On 3 March, 2021 it was extended to last till the end of June, 2021.

What if you've just completed a property purchase?

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.

Will this apply to second homes or buy to let properties?

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 will you save?

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.

Has there been a stamp duty holiday before?

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.