The Chancellor has announced that from 8 July, the stamp duty threshold will be temporarily raised from £125,000 to £500,000.
The Chancellor Rishi Sunak has confirmed a major stamp duty cut in a bid to boost the housing market.
Speaking at the summer economic update, Sunak revealed plans to raise the stamp duty threshold from £125,000 to £500,000 in England and Northern Ireland.
The stamp duty holiday will start immediately and run until 31 March 2021.
It means that nearly nine out of 10 transactions will no longer be subject to stamp duty.
Meanwhile, the average stamp duty bill will fall by £4,500. And in London and the South East, home to more expensive properties, buyers could save up to £14,999 overnight.
Richard Donnell, research & insight director at Zoopla said: “The immediate increase in the stamp duty threshold will help sustain the rebound in housing market activity across England.
“The government will expect the change to stimulate more housing sales over the second half of the year and that savings made by buyers will be reinvested in home improvements, white goods and furniture, rather than bidding up the cost of housing.”
Here’s how the stamp duty holiday could impact you.
What is stamp duty?
Buyers must pay stamp duty when buying a home or piece of land worth £125,000 or more in England and Northern Ireland. It is charged on a tiered basis (so you only pay the higher rates on the slice above any threshold – the same as income tax).
These are the rates:
- Up to £125,000: 0%
- On the portion from £125,001 to £250,000: 2%
- On the portion from £250,001 to £925,000: 5%
- On the portion from £925,000 to £1.5m: 10%
- Above £1.5m: 12%
There are exemptions available for first-time buyers, who don’t have to pay stamp duty on the first £300,000, so long as the home doesn’t cost more than £500,000.
Meanwhile, people buying additional property for £40,000 or more, such as second homes, pay an extra 3% of stamp duty on top of regular stamp duty rates. The surcharge effectively works as a slab tax. In other words, the 3% loading applies to the entire purchase price of the property.
It is worth noting that stamp duty is different if the property or land is in Scotland or Wales.
So how will the stamp duty holiday work?
Sunak’s new measure means that buyers will only start to pay stamp duty on property above £500,000.
This will be for people buying their first home, or moving up or down the housing ladder.
These are the new holiday rates:
- Up to £500,000: 0%
- On the portion from £500,001 to £925,000: 5%
- On the portion from £925,001 to £1.5m: 10%
- Above £1.5m: 12%
The 3% stamp duty surcharge will apply on top of the new holiday rates, so people buying additional homes will attract a 3% stamp duty bill on the first £500,000 of property.
This will still result in a saving, because the 3% rate previously applied on the first £125,000, with higher rates above that.