On the 8th July in his summer statement, Rishi Sunak, the Chancellor of the Exchequer, announced a holiday on stamp duty, increasing the threshold from £125,000 to £500,000.
The news has provided a helpful, and much needed, boost to many looking to buy a home in the post Covid-19 landscape - but what exactly does it mean for buyers and how can they take advantage of it?
In this blog, we'll provide a rundown of the stamp duty holiday, looking into its implementation and answering your questions on how it might affect you and your plans for buying a house.
What is stamp duty?
Let's start with the basics by looking at what stamp duty actually means. Stamp Duty Land Tax (SDLT) or Stamp duty is the term that refers to the government tax you have to pay when you buy a new home. The amount you pay is normally a percentage of how much you paid for your new home and you tend to pay it as a lump sum when the sale is agreed and finalised.
If you're a first-time buyer, you don't have to worry about stamp duty unless you buy a first-time home that's over £300,000. For homeowners who are moving to a new house, you'll have to pay stamp dutyfor anything over £125,000.
What does the stamp duty holiday mean?
The stamp duty holiday raises those thresholds we just looked at to £500,000 for everyone. That means no matter if you're a first time buyer or if you already own a property, you'll only pay stamp duty if the home you're buying is over £500,000 in value.
This is great news for many people, meaning they no longer have to worry about setting aside money for the tax. Instead that money can be put towards the initial deposit for a mortgage, or towards furniture for the new home
How does this affect buyers?
For first-time buyers, the stamp duty freeze won't have much effect on their plans, since most first-time buyers buy less expensive properties for their first home. The first time buyers that will see the most benefit from the holiday are those living in the more expensive areas of the UK, namely, London, the south and the south-east.
For movers and those who are looking to upgrade, the freeze makes this an excellent time to buy a more expensive or higher-value home than the one you already own. Since the stamp duty normally applies to any purchase over £125,000 for buyers in this category, the stamp duty holiday opens up a market of properties that may have previously been out of reach. A breakdown of the new stamp duty is illustrated below:
Why is the government granting the stamp duty holiday?
The government is putting the stamp duty holiday in place in order to boost the housing market in the wake of the Coronavirus crisis. The more affordable houses become, naturally, the more people will buy homes. Since the stamp duty reduces the prices of more expensive homes for movers, wealthier home buyers will be putting more money into the market.
If you're thinking of taking advantage of the stamp duty holiday to buy a new property, whether as a first time buyer or a mover, we've got a collection of tasteful and contemporary properties in some of the UK's most desirable locations, ready to move into now.