The Stamp Duty holiday and how it could save you up to £15,000 if you’re buying a home

Stamp Duty Holiday

In recent months, lockdown meant that the housing market suffered a significant decline. With viewings unable to take place and surveyors barred from undertaking valuation, property transactions fell by more than half.

To boost the flagging housing market, the Chancellor has announced a Stamp Duty holiday until 31st March 2021. If you’re considering buying a new home, getting the keys before this date could save you up to £15,000.

So, what do the Stamp Duty changes mean for you?

Stamp Duty threshold raised to £500,000

Stamp Duty is a tax you pay when purchasing property or land in England and Northern Ireland. Scotland and Wales have similar property taxes (see below).

Previously, you would have paid Stamp Duty if you bought a property for more than £125,000 unless you were a first-time buyer in which case you’d have paid no Stamp Duty on a purchase up to £300,000.

Now, the threshold has temporarily increased to £500,000 in a bid to encourage movement in the property market.

Nine in ten people buying a home between now and 31st March 2021 will no longer need to pay Stamp Duty. The average bill will fall by £4,500, and so you could save a considerable sum if you make sure you complete by the end of March.

The table below shows how much you could save if you purchase before 31st March 2021.

Purchase Price    Stamp Duty rate payable until 31st March 2021   Amount of Stamp Duty payable before 31st March 2021    How much you will save thanks to the Stamp Duty holiday 
£100,200   0%   £0   £0
             
£200,000   0%   £0   £1,500
             
£300,000   0%   £0   £5,000
             
£400,000   0%   £0   £10,000
             
£500,000   0%   £0   £15,000
             
£750,000   0% on first £500,000
5% on £500,000 to £750,000
  £12,500   £15,000
             
£1 million   0% on first £500,000
5% on £500,000 to £925,000
10% on £925,000 to £1 million
  £28,750    £15,000
             
£1.5 million   0% on first £500,000
5% on £500,000 to £925,000
10% on £925,000 to £1.5 million
  £78,750   £15,000
             
£2 million   0% on first £500,000
5% on £500,000 to £925,000
10% on £925,000 to £1.5 million
12% on £1.5 million to £2 million
  £138,750   £15,000

 

Scotland and Wales also announced tax holiday

As different property taxes apply in Scotland and Wales, the Chancellor's announcement only affected property in England and Northern Ireland.

However, the devolved administrations in both Scotland and Wales have now announced similar tax breaks:

Scotland - the starting threshold for Land and Buildings Transaction Tax (LBTT) for residential property transactions will temporarily rise from £145,000 to £250,000. This will save buyers up to £2,100 in tax and will run from 15th July 2020 to 31st March 2021.

Wales - the starting threshold for Land Transaction Tax will also rise to £250,000, but only for residential properties (it does not apply to second homes or Buy to Lets). This will run from 27th July 2020 to 31st March 2021.

Purchasing a second property

If you’ve been thinking about investing in a second property, the raised Stamp Duty threshold also applies to you. This includes buying a holiday home or a Buy to Let investment.

Second properties will still incur the 3% Stamp Duty surcharge that is due. However, assuming you pay less than £500,000, you won’t have to pay the standard Stamp Duty rate alongside this. It could significantly reduce the costs of buying a second property as a second home or as an investment.

For example, if you were to purchase a second home in England or Northern Ireland before 31st March 2021 costing £250,000, you’ll now pay Stamp Duty of £7,500, saving you £2,500.

 

Filing a Stamp Duty return

You have 14 days after you complete on the purchase of any property to file a Stamp Duty return to HM Revenue & Customs. You will need to pay any Stamp Duty due by this date too.

Even if you don’t owe any Stamp Duty – for example, because of the raised threshold during the Stamp Duty holiday, you still need to submit a return. This applies to first-time buyers as well.

Your solicitor will usually deal with the return and pay your Stamp Duty bill on your behalf, but you can do it yourself. If you don’t pay the full amount on time, daily interest will also be due, so if you’re handling the return and bill yourself, keep this in mind.

 

Get in touch

If you’re thinking of buying a home and taking advantage of the Stamp Duty holiday, we can help get you the mortgage you need. Call us on 03300 583 859 to find out more.

Please note: This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation which is subject to change.