The Chancellor Rishi Sunak has announced a short-term holiday on stamp duty. It will apply on the first £500,000 of all property sales in England and Northern Ireland. This is significant attempt to give the property market the injection it needs.
Stamp duty is a tax paid across the UK, although the rate varies between each country. It is tax paid by people when they’re buying residential properties, or a piece of land. Stamp Duty is also classed slightly different between each country. In England and Northern Ireland buyers will pay Stamp Duty Land Tax. In Wales buyers will pay Land Transaction Tax, whilst in Scotland it is called Land and Buildings Transaction Tax.
The amount of tax you pay will depend on which part of the UK you buy your property. The price of your property will also play a key part. The tax will apply regardless of whether you are buying outright or with a mortgage, or whether the property is leasehold or freehold.
According to figures released by HMRC, it is estimated the Governments’ revenue attributed to Stamp Duty is around £12 billion. This is roughly 2% of the Treasury’s tax revenue. The 9-month stamp duty holiday is expected to cost the Treasury an estimated £3.8 billion in lost revenue.
Before the change, the threshold where you start to pay stamp duty in England and Northern Ireland was £125,000. If you were a first-time buyer this would be £300,000 if your property was below £500,000. Rishi Sunik has raised this threshold to £500,000 from Wednesday 8th July. It will be in place across England and Northern Ireland until early 2021.
For properties that cost more than £500,000 the bands remain unchanged. However, savings of £15,000 will be made on the first £500,000. If you bought a house for £600,000, for example, you’d only need to pay £5,000. This is 5% of the £100,000 above the £500,000 threshold. Before the changes were announced, £20,000 would have to be paid.
The change is intended to help buyers who have been financially impacted because of the Coronavirus crisis. The Treasury claim 9 out of 10 people getting on the property ladder, or moving up it, or downsizing will pay no stamp duty.
If you’re buying an additional property other than your main residence, or on certain buy-to-let properties, you will still have to pay an extra 3% duty. This means that on properties up to £500,000 you will pay 3%. If the property you are purchasing is between £500,001 and £925,000, you will pay 8% on this band; 13% between £925,001 and £1.5 million; and 15% over £1.5 million.
It is only a temporary measure to boost the property market. It became effective from Wednesday 8th July and will last until 31st March 2021. Some critics feel there could be a slump in the property market next April once the holiday period comes to an end.
Stamp Duty is only triggered once you ‘complete’ the purchase. If you’ve exchanged before the 8th July, but completed after this date, you will reap the benefits of the new thresholds. If however, you completed before the 8th July, you will not benefit from the new rates.
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