Great news for homebuyers! Chancellor Rishi Sunak has cut the stamp duty, which you would usually pay on homes costing up to £500,000, to zero.
The move could save buyers as much as £15,000 – as long as they complete the purchase between now and the end of March 2021.
But what is stamp duty? What sort of savings could the ‘holiday’ mean for you? And what if you’ve already started the process of buying a home?
What is stamp duty?
Stamp duty is a tax you pay when you buy a property or piece of land.
Under the existing rules, you pay nothing on the first £125,000, or £300,000 if you’re a first-time buyer.
Then it’s 2% on the portion between £125,001 – £250,000 and 5% between £250,001 – £925,000.
Over £925,000 it’s 10% and eventually 12% on homes costing £1,500,001 or more.
What are the new stamp duty ‘holiday’ rules?
Under the terms of the ‘holiday’, those buying a property in England and Northern Ireland won’t pay any tax at all on purchases up to the £500,000 threshold – a saving of up to £15,000.
Above £500,000 the normal rates apply, but you still make the saving on the first half a million.
The governments of Scotland and Wales apply different tax rules, and people buying here will pay 0% only on the first £250,000.
What savings might I make?
Homebuyers could save a pretty penny!
- If you’re buying a home for £250,000, you’ll save £2,500.
- If you’re buying a home for £300,000, you’ll save £5,000.
- If you’re buying a home for £400,000, you’ll save £10,000.
- If you’re buying a home for £500,000, you’ll save £15,000
There’s also a reduced rate for those buying a second home – 3% instead of up to 8% on the first £500,000.
What if I’ve already started the purchase process?
If you’ve already agreed to a purchase price with a seller, engaged a solicitor and had surveys done, it’s good news! You’ll still benefit from the stamp duty reduction.
As long as your purchase hasn’t been ‘completed’ yet, you won’t pay a penny in stamp duty. ‘Completion’ is the final moment of the purchase, when the full amount is paid to the buyer and you get the keys to the home.
How long do I have?
The reduced stamp duty rates apply between now and the 31st of March 2021. That’s the date any property purchase must be completed by to benefit from these rates.
Currently, the plan is that the old stamp duty rules will once again apply after this date.
Time to make a move?
There’s recently been a surge in home sales, so if you’re hoping to take advantage of the tax reduction, it might be a good idea to get your property hunt going – solicitors and surveyors could be very busy in the months ahead.
Here at Policy Expert we wish you all the best with your search and hope you find your dream home soon.