The COVID-19 pandemic has had major impact on numerous sectors and the UK’s property market is no exception. In a bid to encourage homebuying, the government has introduced a ‘stamp duty holiday’, which could save you thousands of pounds.
If you’re considering moving house, now is a great time to do it. Here’s more information.
How does stamp duty usually work?
When you buy a property you’ll usually pay stamp duty tax – unless it’s priced at below £125,000 or £300,000 for first time buyers (if a property is worth £500,000 or less). The amount you’ll pay depends on how much the house or apartment costs and the rates rise incrementally.
What’s changed?
Chancellor Rishi Sunak introduced a stamp duty holiday in a bid to stimulate the property market again. This means that you’ll no longer pay any stamp duty when you purchase a home unless it’s over £500,000 in which case you will only be taxed on the value above that amount. If it’s £500,001 to £925,000 it will be 5%, then it’s 10% for properties that sell for £925,001 to £1.5 million and 12% for those that sell for over that amount.
This will save buyers as much as £15,000.
The tax holiday is set to be in place until 31st March 2021 which gives buyers plenty of time to find the right property and make the most of the financial benefits.
Stamp duty holiday – breaking down the figures
Here are a few examples of how much you could save under the new stamp duty break.
Example 1
Janet purchases a house that costs £275,000 and she is not a first time buyer. Previously she would have had to pay £3,750 in stamp duty whereas now she’ll pay nothing.
Example 2
Ahmed buys an apartment at £450,000, and like Janet, has previously owned a property. Under the usual stamp duty rates, he would have paid £12,500. Now, he won’t have to pay any stamp duty tax at all.
Example 3
Dave and Kina purchase a home for £320,000 and they’re first time buyers. The usual stamp duty rates would have meant that they’d have had to pay £1,000 (a buyer who’d already owned a home would have paid £6,000). However, with the stamp duty holiday they won’t pay anything.
What about second homes?
Landlords and second home buyers are also eligible for the tax cut but will still have to pay the extra 3% of stamp duty they were charged under the previous rules.
The stamp duty holiday is designed to support those who might struggle more to find the funds to purchase a property.
Interestingly, the news has already had a knock-on effect on mortgages, with Nationwide announcing that they’ll be offering a 90% mortgage again (previously, their lowest deposit requirement was 15%).
In short, if you’re considering moving home in the future, now is the time to do it, when prices are slightly lower than usual, and there’s no stamp duty to pay. To find out more, get in touch with the Squires team today.