Last week, Chancellor Rishi Sunak announced several new initiatives to help jumpstart the economy. The main aim of his Summer Statement was to outline the government’s plan to stabilise the workforce and to stimulate new employment opportunities amid the ‘profound economic challenges’ that COVID 19 has brought about.
In his address, the Chancellor expressed the vital role the housing market has in supporting the economy as a whole. As a result, the stamp duty threshold will increase from £125,000 to £500,000.
See the table below for a summary of the new changes:
This means if you are a first-time buyer purchasing a residential property for under £500,000 you will pay £0 stamp duty. If you are buying a property above £500,000, you will pay stamp duty, but only on the amount above £500,000.
If you are buying a second property and/or buying through a Limited Company, you will now only pay the 3% additional property surcharge for properties valued under £500,000.
When do these new rates come into effect?
They are effective immediately and will last until 31st March 2021. SDLT is payable when an individual takes possession of the property once the transaction has legally completed, or when the contract has been “substantially performed”, which is when at least 90% of the consideration has been paid. So, if you complete your purchase before the end of March next year, or you have paid 90% of the cost before then, you may benefit from the SDLT holiday.
So, if you are considering buying a home or investment, to do it sooner rather than later. Given the stamp duty holiday, we anticipate prices may increase, so to take advantage we would recommend buying sooner rather than later.
How much will you save?
Ultimately, the more expensive the home you’re buying, the more money you’ll save under these new rules. The government predicts that the average stamp duty bill will fall by £4,500, but for properties priced at £500,000 the saving will be £15,000.
The examples below show how much you’ll pay depending on the price of the home you buy. Property price £600,000 – 0% on the first £500,000; 5% on the next £100,000 – total bill of £5,000 (previous bill £20,000)
Property price £750,000 – 0% on the first £500,000; 5% on the next £250,000 – total bill of £12,500 (previous bill £27,500)
Property price £1m – 0% on the first £500,000; 5% on the next £425,000; 10% on the remaining £75,000 – total bill of £28,750 (previous bill £43,750)