Stamp Duty Holiday
The Chancellor of the Exchequer Rishi Sunak, presented his ‘mini budget’ or summer statement yesterday in an effort to stimulate the economy post-Covid-19 Lockdown, included in the statement is a Stamp Duty Holiday, which could save you thousands! This new tax break announced today by Chancellor Rishi Sunak, raises the amount at which tax is charged from £125,000 to £500,000.
Stamp duty land tax is a tax charged on the transfer on the total price paid for land or property, It is levied on the majority of those who purchase a home in England and Northern Ireland. However, many commentators claim the market slow down is due to Stamp duty which prohibits many people from buying or moving due to the additional cash required. First-time buyers will now not pay a penny of Stamp duty on homes up to £500,000! This is widely anticipated to engage first tome buyers, and stimulate the market.
Who Will Benefit From the Stamp Duty Holiday?
The loosening of the Stamp Duty changes will benefit everyone, those purchasing more expensive homes will benefit from reduced costs.
Mr Sunak said nine in 10 buyers would no longer pay any stamp duty.
Stamp duty land tax currently raises about £12bn for the Exchequer each year. This amount is expected to fall under the new rules. The Government estimates this stamp duty cut will cost £3.8bn in lost tax revenue.
What Will the Stamp Duty Holiday Do?
The move is intended to kickstart a property market which has slumped since the start of the coronavirus outbreak. Reducing stamp duty makes it cheaper to purchase properties and it is hoped this will aid the country’s recovery from the pandemic. Therefore this ‘Stamp Duty Holiday’ is expected to significantly stimulate the market.
When will the Stamp Duty Holiday Start & Finish?
The stamp duty holiday will start immediately and run until March 31 2021.
Based on the average property price of £248,000, this would save a typical buyer £2,460 in tax. Someone purchasing a £500,000 property should save £15,000.
What about Those paying the 3% Surcharge?
Unfortunately, for those buyers who have to pay the 3% stamp duty surcharge, it will still apply. However, the initial band from 125,000 has now been moved to 500,000. Therefore there is still a saving; a buyer purchasing their second property at £300,000 will pay 3%, totalling £9,000, whereas before the same purchase would cost £14,000 in Stamp duty, a saving of £5,000!
Who will benefit from the Stamp Duty Holiday?
In short, everyone! First time buyers, landlords looking to expand their portfolio, agents will benefit from increased demand. The reduction in stamp duty is a very welcome piece of news, landlords have got used to tax changes not being in their favour over recent years, so this comes as a welcome change.
What effect will this have on the market?
The timing of the stamp duty holiday which finishes on 31st March 2021, coincides with the plans announced to hike stamp duty by 2% for overseas buyers. The increased stamp duty for overseas buyers was announced by Sunak earlier in March it will include British nationals living overseas and come into force on the 1st of April 2021.
Therefore an overseas buyer, who is buying a second property, will have to pay the 3% surcharge and the additional overseas 2% rate, on top of the normal bands.
As an example, an overseas buyer, buying their second property at £300,000 will cost
£9,000 On or before 31st March 2021
Or £20,000 on and after 1st of April 2021.
That represents a huge £11,000 saving.
We are expecting a wave of investor activity particularly from those in the Dubai and Middle East, and also Asia. British expats will be looking to repatriate funds back home to beat the tax hikes.
If you want to discuss property investment options feel free to get in contact