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Chancellor Raises Stamp Duty Threshold To £500k Till March 2021 – Forbes

Red and green doors on a brick facade

The government is increasing the stamp duty exemption to invigorate the market


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Rishi Sunak, chancellor of the exchequer, today announced that residential property transactions costing up to £500,000 will be exempt from stamp duty land tax (SDLT) until 31 March 2021. The previous figure was £125,000.

The change takes effect immediately and applies to all residential property transactions in England and Northern Ireland. There will be no distinction between first-time buyers and those who have bought previously.

Scotland and Wales have their own regimes for property sales taxes.

For properties costing more than £500,000, tax will only be levied on the amount paid above £500,000.

The impact of the change will be as follows:

  • Property price up to £500,000 – stamp duty 0%
  • 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%
  • Remaining amount above £1.5 million – 12%.

The 3% higher rate that already applies for purchases of additional dwellings (for example, second homes and buy-to-let properties) will apply on top of the new rates, which means tax will be payable here at 3% on prices up to £500,000.

The rates for the other bands in the case of additional dwellings with therefore be 8%, 13% and 15%.

The chancellor said nine out of 10 people buying property will pay no SDLT while the change is in effect, while those paying will typically save £4,500. He pointed out that property transactions halved in May as a result of coronavirus and said the temporary change would revitalise the housing market.

George Bear at financial analysts IG, says that demand for houses is likely to increase as a result of the stamp duty change: “The number of houses on the market could also increase as people might think that now is a good time to sell up and move. However, the chancellor’s plan might also mean that people who are looking to sell could increase their asking price due to buyers having more cash available to spend.

“The savings from stamp duty might well have a knock-on effect to the wider economy. This is because people could spend the money they’ve saved on stamp duty on property renovations, new furniture, or other things for their house.”

What is Stamp Duty?

Here is a run-down of the stamp duty regime as it applied before the chancellor’s announcement. It is likely this will resume once the temporary change in the exempt amount comes to an end next March.

Outside the temporary measure announced today, SDLT is payable when you buy a residential property worth over £125,000 in England and Northern Ireland (the figure is £150,000 for non-residential land and properties).

In Scotland, buyers pay the Land and Buildings Transaction Tax which in Wales the Land Transaction Tax applies.

SDLT is not paid in full by first-time buyers on properties costing £500,000 or less. Buy-to-let landlords and others buying a second property pay a higher rate of SDLT.

Payments are due within 14 days of completion of the transaction, but if you are using a professional conveyancer, such as a solicitor, they will handle the paperwork (including applying for first-time buyer relief), pay the tax on completion and include the amount on their bill.

How much is Stamp Duty?

First-time buyers (where the property price is £500,000 or less) do not pay any SDLT up to £300,000 and pay 5% SDLT on the portion from £300,001 to £500,000.

If more than one person is buying a property, both or all of them must be first-time buyers to qualify for the relief.

First-time buyers buying a property costing more than £500,000 are treated in the same way as those who have bought before.

Those who have bought before pay increasing amounts of SDLT depending on the price of the property, as follows:

  • Up to £125,000 – 0%
  • Next £125,000 (from £125,001 to £250,000) – 2%
  • Next £675,000 (from £250,001 to £925,000) – 5%
  • Next £575,000 (from £925,001 to £1.5 million) – 10%
  • Remaining amount above £1.5 million – 12%.

As an example, a house costing £275,000 would attract SDLT as follows (for a non first-time buyer):

  • 0% on the first £125,000 = £0
  • 2% on the next £125,000 = £2,500
  • 5% on the final £25,000 = £1,250
  • Total SDLT = £3,750.

Anyone buying an additional residential property (so that they will own more than one property) will usually have to pay 3% on top of the normal SDLT rates.

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