Chancellor Rishi Sunak recently announced that the stamp duty threshold for property sales in England and Northern Ireland will be increased to £500,000 until 31st March 2021 and that the new changes are effective immediately.
What is Stamp Duty?
Stamp duty refers to the tax paid when purchasing a property. In England and Northern Ireland, it’s known as Stamp Duty Land Tax (SDLT), whereas in Wales it is called Land Transaction Tax and people purchasing properties in Scotland pay Land and Buildings Transaction Tax.
It’s important to note that the changes to the threshold that were recently announced will only apply to property sales in England and Northern Ireland.
Changes to the Stamp Duty Threshold
Prior to the announcement, property purchases would be subject to stamp duty tax on anything over £125,000, or £300,000 for first time buyers. These latest changes to the stamp duty threshold will replace the discount available to first time buyers.
The table below shows the new stamp duty rates, which will remain in place until 31st March 2021
| Property or lease premium or transfer value | SDLT rate |
| Up to £500,000 | Zero |
| The next £425,000 (the portion from £500,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
Source: gov.uk
The changes are expected to result in the average stamp duty bill being reduced by £4,500 and it’s estimated that 90% of people buying a main home during the stamp duty holiday will pay no SDLT at all.
How Much Money Could I Save?
If someone was to buy a property for £500,000 or more, they would save £15,000 as a result of the new rate changes as they would benefit from using up the whole of the new SDLT threshold.
Purchases under £500,000 will be subject to no stamp duty at all – so the amount saved in comparison with the previous SDLT rate would depend on the agreed price of the property.
For example, if you bought a property for £275,000, under the old rates, you would be subject to a stamp duty bill of £3,750.
Here is a useful online stamp duty calculator using the new SDLT rates:
https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/
What about Second Homes and Investment Properties?
The new temporary rates are aimed primarily at helping people who are looking to buy a main home, but those looking to purchase a second home or a buy-to-let property could also benefit.
Previously, there would be a 3% SDLT rate for purchases up to £125,000 falling into this category, with any amount between £125,000 and £250,000 being subject to 5% SDLT.
Under the new temporary rules, the 3% rate will still apply, however the threshold for this initial rate of tax has been increased to £500,000.
The table below shows the new stamp duty rates for property purchases falling into this category. Once again, these new rates are effective immediately and will last until 31st March 2021.
| Property or lease premium or transfer value | SDLT rate |
| Up to £500,000 | 3% |
| The next £425,000 (the portion from £500,001 to £925,000) | 8% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 13% |
| The remaining amount (the portion above £1.5 million) | 15% |
Source: gov.uk
How Can We Help?
This is undoubtedly a great incentive for people looking to buy a new home as well as landlords looking to add to their buy-to-let portfolio. With more people keen to buy and take advantage of these significant, but temporary, stamp duty cuts, this could also be a great opportunity for those considering selling their property.
Whether you are looking to buy or sell, our experienced team are on hand to help you every step of the way.
