It is the news we were all waiting for. Chancellor of the Exchequer Rishi Sunak chancelled his way into Chancel Town and announced a stamp duty holiday effective immediately. It means that buyers won’t need to pay a penny in stamp duty on properties up to £500,000.
The move looks set to save buyers thousands when they purchase a home and will be in place for the next nine months. That means now really is the time to start making moves in the UK property market.
To get you ready for the new Stamp Duty Land Tax legislation, we’ve put together this handy guide detailing everything you need to know. So read on and get the lowdown on stamp duty and what it means for your next move.
What is Stamp Duty Land Tax?
Stamp Duty Land Tax is a tax levied on single properties. If your first home purchase costs more than £125,000, it means you will need to pay Stamp Duty Land Tax. If you’re buying an additional home, you will need to pay stamp duty on any amount above £40,000.
Previously, there were several rate bands for stamp duty. These included:
0% on the first £125,000 = £0
2% on £250,001- £925,000
5% on 10% on £925,001-£1.5m
12% on any value above £1.5m
What are the new rules regarding stamp duty?
A stamp duty holiday has been put in place effective immediately. It means that buyers will no longer be required to pay any stamp duty on homes up to £500,000 – whether they’re purchasing their first home, moving from one place to another, or buying an additional property.
Under the new stamp duty rules, someone purchasing a home for £500,000 stands to save a whopping £15,000 in stamp duty.
Even lower-priced homes will see significant savings. A £150,000 home would save you £500, while a £350,000 property saves £7,500 (£2,500 for first-time buyers). It’s set to free up millions of pounds for homebuyers all over the country.
Even better news for additional home buyers
The holiday will undoubtedly unlock the property market for first-time buyers paying more than £300k, along with home movers and second-home buyers. Second-home buyers will still have to pay the second-home surcharge (which starts at 3% of the purchase price) but will still make significant savings on the stamp duty holiday.
Why have changes been made to stamp duty?
Covid-19 changed everything when it effectively shut the world down in mid-March. The UK property market was one of the many industries brought to a halt, as it went into a deep freeze throughout March, April and early May.
The Government announced plans to get it going again in mid-May, waking the market up from its three-month hibernation. But with the virus still in circulation, along with the financial impact felt by many from the fallout of Covid-19, people have, understandably, been cautious about coming back to the market.
Demand is certainly there, with enquiries on the rise. So far, however, punters have needed that extra confidence boost to get to back pre-coronavirus buying behaviour. The stamp duty holiday should do just that, helping individuals save thousands while obtaining the keys to their new home.
How long will the new stamp duty measures last?
Rishi Sunak stated that the new stamp duty holiday will last for nine months, which means that the period until March 31st 2021, will be busy one for the property market. Previously, a stamp duty holiday in 2008 lasted for one year and was put into place to help stimulate the market after the financial crash.
While nine months is the indicated length, there’s every chance the government could increase the latest stamp duty holiday. Much will depend on the short-term effect it has on the UK housing market.
What does the stamp duty reform mean for the property market?
Demand for homes increased over the last six weeks as we emerged from the lockdown and embraced the new normal. But it’s going to take more than pent-up demand to get the property market ebbing and flowing in full effect.
With the average UK house price currently sitting at £232,000, the majority of people buying homes will benefit from the stamp duty holiday. In the short term, it’s expected that the holiday will increase transactions in the housing market. This could, over time, lead to higher house prices as demand for homes increased.
The stamp duty holiday is designed to give it a timely boost and bring total confidence back to the market. It will see enquiries turn into genuine offers, and more people will hunt for property safe in the knowledge they won’t have to pay stamp duty.
Speaking about the changes to stamp duty, Emoov COO, Naveen Jaspal, said:
“Stamp duty holiday is a great asset to all buyers, meaning they can now use their stamp duty savings to add to their deposit amount and enjoy more flexibility with property prices. We expect to see house prices stabilise and rise during this stamp duty holiday.”
With the summer holidays right around the corner, reforms to stamp duty are the best type of holiday the UK could have hoped for in time for the warmer months.
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