Rishi Sunak’s announcement that there will be a Stamp Duty holiday on the first £500,000 of all property sales in England and Northern Ireland will be a massive boost to the housing market. Currently Stamp Duty is levied at 2% above £125,000 and 4% above £250,000 meaning this is a significant saving for buyers.
Although the housing market has got off to a flying start since lockdown was eased, estate agents have been nervous that this is just a bubble and have been voicing their concern for the future when the furlough scheme comes to an end and we see the full scale implications of unemployment and the effect that will have on the economy.
The Chancellor’s cut will delight many people who have been uncertain about whether to move house or not. The Stamp Duty holiday will last until 31 March 2021 which will see us through the winter months, a period which is generally more subdued. It is likely to boost the number of transactions which obviously fell during lockdown and could very well lead to a rise in house prices. Earlier this week the Halifax reported that house prices had fallen for the fourth month in a row, although demand has clearly picked up.
The Home Builders’ Federation, which has been campaigning for a Stamp Duty cut have welcomed the news and say it will ‘deliver significant economic benefits and help support the UK’s recovery’.
So how does it work? Anyone completing on the purchase of their main residence costing up to £500,000 between 8 July and 31 March 2021 won’t have to pay Stamp Duty. Those buying a property of £500,000 or more will only be taxed on the value above that amount in increments.
The next portion of £425,000 (so between £500,001 to £925,000) will be taxed at 5%, and then the rate increases to 10% on the next £575,000 (values between £925,001 and £1.5 million). The remaining amount (the portion over £1.5 million) will be taxed at 12%.
Landlords and second homes buyers are eligible for the tax cut but will still have to pay the extra 3% of stamp duty they were charged under the previous rules. There are special rules for first time buyers which are replaced by the new reduced rates.
Stamp Duty is payable upon completion of a purchase so if you have already exchanged contracts but haven’t completed yet, you will benefit from the cut.