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09 Jul 2020

Stamp duty Holiday: What Does it Mean for You?

Stamp duty Holiday: What Does it Mean for You?

The UK chancellor, Rishi Sunak, has revealed the dramatic move to slash Stamp Duty Land Tax (SDLT) for purchases of residential property between 8 July 2020 to 31 March 2021, in England and Wales. The new tax rates, aimed at kickstarting the property market and reducing the financial burden to homebuyers during Coronavirus, will apply to both first time buyers and previous homeowners alike.

What are the New Rates?

From the 8 July, homebuyers will only start to pay SDLT on the amount that you pay for the property above £500,000. The next portion of the property’s price (£500,001 to £925,000) will be taxed at 5%, and the £575,000 after that (£925,001 to £1.5 million) will be taxed at 10%. The remaining amount (over £1.5 million) will be taxed at 12%.

Stamp Duty Tax Holiday

The tax savings compared to the previous regime are stark and provide a fantastic incentive for both first time buyers in search of their first home, or current homeowners wishing to move locations, upgrade or downsize and take advantage of the tax savings.

Old Stamp Duty Rates v New Stamp Duty Rates

Property Value Old Rates New Rates
£125,000 £0 £0
£200,000 £1,500 £0
£300,000 £5,000 £0
£400,000 £10,000 £0
£500,000 £15,000 £0
£600,000 £20,000 £5,000
£800,000 £30,000 £15,000
£1,000,000 £43,750 £28,750
£1,200,000 £63,750 £48,750
£1,400,000 £83,750 £68,750

From 8 July 2020 to 31 March 2021 the special rules for first time buyers are replaced by the reduced rates set out above.

The average stamp duty bill will fall by £4,500; Chancellor Rishi Sunak has claimed in his announcement. Furthermore, nearly nine out of ten people buying a main residential home this year will end up paying no stamp duty at all.

Will This Benefit me?

At CityRise, we believe this, combined with the cut-price deals on offer for new build properties, provides an opportunity too good to turn down. If you are looking to buy your first property, you have an additional £200,000 to spend with the SDLT exemptions raised from £300,000 to £500,000. This is especially useful for first-time buyers in more expensive regions of England for instance London where the average flat price is £490,706 and terraced house is £652,489.

Alternatively, if you have been considering upgrading your property for a while then the stamp duty holiday provides an even bigger incentive to make the move this year or early next year. The financial burden of moving to a new house has always been high, with stamp duty arguably being the largest cost, especially for expensive property purchases. The stamp duty holiday will represent considerable savings for buyers and should be considered by all those thinking of buying a property.

Will This Benefit me as a Landlord?

Simply put, yes. The Chancellor has made clear that the stamp duty holiday will also apply to buy to lets and second homes. This means that investors looking to purchase property will benefit from the new rates plus the 3% surcharge that was introduced by the UK government in April 2016. Despite the 3% surcharge for buy to lets remaining in place investor landlords will still be able to save thousands in stamp duty costs as the table below highlights.

Changes to stamp duty by region

Average stamp duty bill under old system Average stamp duty bill under new system % change
London £23,220 £12,520 -46%
South East £10,230 £3,330 -67%
East £7,530 £1,840 -76%
South West £5,820 £1,260 -78%
West Midlands £3,150 £420 -87%
North West £2,410 £290 -90%
Yorkshire & Humber £2,200 £460 -81%
North East £1,390 £130 -91%
England £7,120 £2,400 -66%

The largest savings for buy to lets can predictably be found in the North of England and the Midlands where house prices are generally under £500,000.

At CityRise, we believe this is a positive development and will not only reignite the property market but also provide a much needed boost to the buy to let industry. This will in turn improve the supply of rental properties across England. If you would like to discuss different purchase options available and how the stamp duty holiday can help you start or further your property journey, please contact CityRise and speak to one of our property professionals today.

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