Stamp duty tax is the amount you pay when purchasing a property, and it’s usually calculated as a percentage of the purchased property price.
If you’re looking to buy your first home, then it can be very expensive! Fortunately, there’s Stamp Duty Holiday. Chancellor Rishi Sunak declared that stamp duty would be suspended on assets worth up to £500,000. It means that stamp duty1 on the first £500,000 of all transactions in England and Northern Ireland would not be paid until June.
Stamp Duty Holiday Explained
The stamp duty holiday extension is part of the government’s strategy to aid in economic recovery because of the coronavirus pandemic.
After that, the ceiling will be reduced to £250,000, twice what it was before the pandemic. Consumers looking for a house purchase could save up to £15,000. The new rates were supposed to end on March 31, 2021, but announced on March 3, 2021, that’ll be temporarily extended until the end of June 2021.
It will be available to both existing and prospective homeowners who have not owned a home before or are buying their second home. It is expected that this relief will help to stimulate the property market by making it easier for people to make a house purchase.
The goal of this holiday is to help those who may not be able to afford their dream home by making it more affordable for them. To receive this benefit, you must meet certain criteria.
How Stamp Duty Holiday Works
The Stamp Duty Holiday2 is a temporary exemption from stamp duty to purchase newly built homes up to £300,000. During this period, sellers pay no stamp duty to save significant money on their purchase up to £12,500.
For example, if you’re buying a new home worth £250,000, then the saving would be £11,287. This offer only applies where purchasing an off-plan or already constructed property that has not been lived-in.
Amount You’ll Save During Stamp Duty Holiday
You’ll save more money if you spend up to the £500,000 threshold. For example, if you paid £350,000 for a home, you would have paid £7,500 in stamp duty at the outset. You won’t have to pay any stamp duty now that the current stamp duty has been implemented.
How Much Would First-time Property Buyers Expect to Save?
First, let’s define what a first-time buyer is:
- A person who has never owned a property before and owning a property in a foreign country or owning a property by inheritance or gifting makes you disqualified
- A person who buys a home to use as their only and primary residence but purchasing a home to rent does not count
- Two or more people who meet conditions 1 and 2 above that are buying a home together
Stamp duty was already waived for first-time buyers on properties worth up to £300,000 and £500,000 in London. It means that the government’s stamp duty holiday would only help first-time buyers seeking to buy a home worth between £300,000 and £500,000 outside of London.
How Much Money Can Those Who Relocate Save?
Stamp duty was historically applied on all properties priced at £125,000 or more for not-first-time buyers. As a result, those looking to relocate would most likely profit from the stamp duty holiday rather than first-time property buyers. Indeed, under the stamp duty holiday, anyone moving home to property worth £310,000 would save £5,500.
Also, the landlords and second-home owners are now eligible for the stamp duty holiday. However, they will still be required to pay the additional 3% stamp duty imposed by the previous regulations.
Previous Stamp Duty Holiday
The Stamp duty holiday lasted 15 months when it was implemented in September 2008 in the aftermath of the financial crisis, resulting in an 8% rise in sales. It was precise that it only supported assets valued at £175,000 or less.
Does the Stamp Duty Holiday Apply to Second Homes?
Yes, the temporarily reduced Stamp Duty rates extend to second homes and investment properties, but there is still a 3% surcharge. It means that on property sales of £500,000 or less, you’ll only pay 3% Stamp Duty, which is a significant reduction in the amount of Stamp Duty payable.
Who Can Apply for a Stamp Duty Holiday?
Anyone who completes a property purchase between July 8, 2020, until the end of June 2021 will benefit from the stamp duty holiday and will not have to pay stamp duty if it’s their primary home, is in England or Northern Ireland. The cost of property is less than £500,000.
How Much Will You Pay When the Stamp Duty Holiday Ends?
The original zero rate cap will be reduced from £500,000 to a new temporary stamp duty threshold of £250,000 when the stamp duty holiday ends on June 30, 2021. The temporary £250,000 stamp duty threshold will be in effect until September 30, which will result in decreased stamp duty relief for transactions that occur after the stamp duty holiday has ended.
What if You've Just Completed a Property Purchase?
From July 8, 2020, the stamp duty holiday will be in effect. Unfortunately, if you bought anything before that date, you’ll have to pay stamp duty at the old rates and thresholds.
The stamp duty holiday is a great way to reduce the amount of money you need to pay if you’re thinking about buying a property in the UK during this period. It can save you some serious cash and help make your purchase more affordable.
Learning what is stamp duty and how stamp duty holiday work will help you make a firm decision before taking any steps forward with purchasing your new residential property. If you have buyer inquiries, it’s recommended to check with a property expert.