Reduced rates of Stamp Duty announced by Chancellor
The budget announcements made by Chancellor Rishi Sunak today have certainly got people talking, but the announcement of a Stamp Duty holiday is a big one for Buyers and the Property Industry.
What has the Chancellor announced?
The Chancellor has announced that you will not need to pay any stamp duty from today on the first £500,000 if this is to be your main residence. This measure is due to be in place until 31st March 2021 which will be a welcome boost to Buyers.
The measures are more particularly outlined by HMRC here.
What is the position currently and how will the changes help buyers?
Prior to 8 July, if you were a first time buyer you were exempt from having to pay any stamp duty when you purchased your first home as long as the value was less than £300,000. The increase of this limit, the 0% threshold to £500,000 will assist many first time buyers in areas such as London where property values are higher. For example, a first time buyer would currently previously need to pay £10,000 if they bought a property for £500,000.
Anybody who had previously bought a property would pay stamp duty on any property they then bought over £125,000 (this did not apply to buy-to-let properties as additional stamp duty is charged where the property is a second home).
The changes announced to the stamp duty payable will assist anybody who is looking to move house and who currently owns their own home. The stamp duty on a property of £500,000 for somebody who is looking to move home is £15,000, so this will equate to a considerable saving for Buyers.
What about if the property I want to purchase is more than £500,000 or a second home between 8 July 2020 and 31 March 2021?
If you purchase a property for more than £500,000, stamp duty will be payable at different rates depending on the value of the property. The first £500,000 will be exempt but then the sum above will be charged at the following increments:-
| 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% |
For example, if you purchase for £750,000 you will pay 5% of £250,000, being £12,500. This will still be a welcome reduction from the £27,500 you would have paid previously.
If the property is a holiday home or a buy-to-let property, you will pay 3% additional stamp duty above the revised stamp duty rates. Therefore if the property is below £500,000, you will only pay 3%. This could therefore be a good time to invest. Whereas previously you would have paid £14,000 for a property which was purchased for £300,000, you will now only pay £9,000. Illustrated as follows:
| 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% |
As such, some ‘devil is in the detail’, and you should certainly seek further guidance if unsure. We will be ensuring that our clients benefit where possible from the reduced stamp duty rates.
Can I claim any stamp duty relief if I have purchased a new property in the last few weeks?
The changes announced so far only apply to transactions completing from 8 July 2020. We will be keeping all of our clients updated as to any further changes and of course will contact you if these are to be applied retrospectively by HMRC.
How we will proceed at Leathes Prior
We will be implementing this change immediately at Leathes Prior and will be reactive to any further updates which are provided by the Government. If you have any questions about how this will impact on your current purchase or if you would like a quote to purchase a new property, please contact the Residential Property Team by calling 01603 610911 or emailing us here as we would be happy to assist.