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Colchester estate agents. Sudbury estate agents. Ipswich estate

The Stamp Duty Holiday Explained

On July 8th 2020, The Chancellor announced a temporary stamp duty land tax holiday to homebuyers in England and Northern Ireland with immediate effect. This means that anyone purchasing  a home valued at up to £500,000 will no longer pay any stamp duty on the purchase until 31st March 2021.

Normally you must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England and Northern Ireland however due to Covid-19 the chancellor announced that there will be a stamp duty holiday to try and boost the housing market and save the average homebuyer over £2,000.

Stamp duty is payable on the purchase of a property – typically within two weeks of completion and is charged based on the property price. A 2% charge applies to properties between £125,000 and £250,000, so with the average home in England selling at £247,000, existing homeowners buying their next home could potentially save around £2,440. However the current stamp duty rates doesn’t make much of a difference for first time buyers as they are already exempt from stamp duty if their purchase is £300,000 or less, and if the property is under £500,000 then they pay no stamp duty on the first £300,000 (above which the tax applies as normal).

The Normal Stamp Duty Rates:
  • Up to £125,000: 0%
  • On the portion from £125,001 to £250,000: 2%
  • On the portion from £250,001 to £925,000: 5%
  • On the portion from £925,000 to £1.5m: 10%
  • Above £1.5m: 12%
Current Stamp Duty Rates (08/07/2020 - 31/03/2021): 
  • Up to £500,000: 0%
  • On the portion from £500,001 to £925,000: 5%
  • On the portion from £925,001 to £1.5m: 10%
  • Above £1.5m: 12%
However people buying a second home or additional property for £40,000 or more, pay an extra 3% of stamp duty on top of regular stamp duty rates. This will still result in a saving, as previously the 3% rate applied on the first £125,000, with higher rates above that.

Overall the real question still awaits, will the Chancellor extend the Stamp Duty Holiday beyond 31st March 2021. As it stands, there is a 'cliff edge' on 31st March meaning that all transactions completed  after this date will not benefit from the cut in stamp duty. The property ladder hasn’t crashed yet but is there one brewing in the near future...

Check out‘ ‘The Costs Involved When Buying Or Selling Your Home’ to learn more about other costs that you might not be aware of so you can be fully prepared when it comes to buying or selling your home.