Just a few days ago, the UK chancellor of the exchequer, Rishi Sunak, announced a temporary stamp duty holiday on the first £500k of all home sales in Northern Ireland and England. The changes are effective immediately and will run through to March of 2021 and it’s a move that’s been made in an attempt to boost the property market impacted by Covid-19 and make it easier for buyers to complete their purchases.

It’s also a move that also benefits the buy-to-let market, but it’s one that comes at a considerable cost to the taxpayer, as it’s believed it will, in total, cost the exchequer around £3.8bn, which is equivalent to about 2% of the government’s total annual tax intake. In this blog, we look more closely at the rule changes and what they really mean for home buyers.

The stamp duty holiday does present certain opportunities, so it’s important to know what they are so you can take advantage of them before the holiday ends next year. However, before we get into that, we’re going to briefly explain what stamp duty is for those new to the subject.

So, What Exactly is Stamp Duty?

For the uninitiated, Stamp Duty Land Tax (SDLT) is paid by anyone in England and Northern Ireland who’s buying a home that’s over a certain value. Similar rules apply in Wales and Scotland, but the tax goes by a different name, (the Welsh Government name it ‘Land Transaction Tax’ and Scotland call it ‘Land and Buildings Transaction Tax‘) and it has a different set of taxation rules.

The specifics surround exactly how much you’ll pay out in stamp duty in the UK will vary depending on the price of the property and where in the country it’s situated. It’s a tax that’s only paid by the buyer on the amount that exceeds each stamp duty threshold. Before the change on July 8th 2020, the tiered thresholds and percentages read like this:

● 0% on properties valued up to £125k
● 2% on the value between £125k and £250k
● 5% on the value between £250,001 and £925k
● 10% on the value between £925,001 and £1.5m
● 12% on values above £150,001

So, if you bought a home for £300k prior to July 8th, you would pay 2% on the value between £125k and £250k (£2,500) and 5% of the value between £250,001 and £925k (£2,500), making a total payable amount of £5,000.

What The Changes Mean

As we mentioned earlier, the government’s changes have raised the 0% stamp duty threshold to £500k in England and Northern Ireland, which means the theoretical house purchase in the last paragraph would incur no stamp duty at all. Depending on the value of the property in question, this could save home seekers as much as £15,000 on the cost of their home.

House prices are known to have fallen for successive months since the outbreak of the coronavirus and the removal of this large expense is hoped to inject some life into the UK’s housing market. Social distancing is just one of the aspects of the current crisis that have taken their toll on the buoyancy of the market, so many will see it as a welcome move.

Does it Apply if I Was Mid-Way Through a Sale?

First and foremost it’s really important at this stage to mention that the temporary rules only apply to house purchases in England and Northern Ireland, but it’s good news if you are currently going through the motions of buying a property. That’s because it applies to all sales that complete after July 8th, meaning that if you are in the midst of buying a home, you will be able to benefit.

Completion is the point of the house buying process, so if you’ve not got to that stage, you are likely to save thousands of pounds. Unfortunately, if you completed very recently, but before July 8th, it won’t apply to you.

How it Could Help The Housing Market

Most first time buyers are not likely to benefit much from the changes, as the average property price in the UK is around £247,000, meaning that most first time buyer purchases don’t incur stamp duty (the stamp duty threshold for first time buyers £300k). Directly, there doesn’t seem to be an advantage to this group, but indirectly, even first time buyers could gain indirectly by having more homes to choose from.

The changes will benefit those aiming to move home and the market will also benefit from an influx of new sellers who see the stamp duty holiday as a good reason to proceed with listing their property on the market. It’s by no means guaranteed that the changes will have the desired effect, but it should certainly help encourage more people from both sides of the equation to take the plunge.

Red Star Financial Services – We’ve Got Your Back

There’s no denying that the UK’s housing market is going through something of a slump thanks mainly to Covid-19, however, there’s no reason to get too despondent just yet. The government is doing its best to prop things up with tax breaks like this one and with a little luck, as the world returns to normality, we could see the light at the end of the tunnel soon.

At Red Star Financial Services, we make the job of planning for your future a simpler and less stressful process and we bring you blogs like this one to keep you up to date with relevant goings on in the world of finance. If you’d like to know more about what it is we do, why not take a look at our website www.redstarfs.com.

Alternatively, if you’d like to speak to a friendly member of our FCA-regulated team, you can do so by calling us now on 0161 823 1733. They’re ready and waiting to help you secure your long-term financial prosperity.