The chancellor, Rishi Sunak, announced a temporary amendment to Stamp Duty rates on Wednesday.
What is Stamp Duty?
When you purchase land or property in England you must pay Stamp Duty Land Tax (SDLT) on the value of the acquisition.
What is the change to Stamp Duty?
From the 8 July, the Government has raised the tax threshold before you pay SDLT to £500,000.
Previously, anyone purchasing a property would pay 0% SDLT up to £125,000, 2% on the next £125,000 (up to £250,000), then 5% on any amount above that. First time buyers did not have to pay SDLT on the first £300,000.
The chancellor’s changes to the tax mean now nobody will pay tax on their main residence up to a value of £500,000.
What about investment properties and second homes?
Buy-to-let investors and people who are buying a second home are also eligible for the tax break, they will however have to pay the additional 3% Stamp Duty rate for purchasing a second property.
Why has the government introduced these measures?
The government hopes to help home buyers who have taken a financial hit because of the coronavirus crisis. They also hope to boost the property market which took a hit during the lockdown. Many businesses such as solicitors, conveyancers, surveyors, estate agents, and removal companies could not operate as normal during the lockdown and had to furlough staff.
How long will the Stamp Duty holiday last?
The new threshold came into effect on the 8 July and is due to last until the 31st of March 2021.
Can I still benefit if I’ve already completed a purchase?
If you completed your property purchase before the 8 July, you will not be eligible for the tax break.
Am I eligible for the stamp duty payment holiday if I have exchanged on my property?
Stamp duty is payable on completion, so if you’ve exchanged contracts and are currently waiting for completion you will be able to benefit from the change. This could save you thousands of pounds in Stamp Duty.
What happens next?
With the Stamp Duty Threshold being only a temporary measure, the property market may well boom until the end of the year, potentially pushing house prices up.
With house purchases taking an average of between eight and 12 weeks, those who begin their home-buying journey in early January, may well miss out on the tax break.
It is likely that conveyancers and solicitors will be under a huge amount of pressure to complete all purchases before the 31st of March 2021 and therefore it is advisable those wishing to move home or buy their first property instruct a solicitor as early as they can.
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