Stamp Duty Announcement: Here’s how to make huge savings
Stamp Duty Announcement:
How to make huge savings
As the property market picks up once again, Chancellor Rishi Sunak took extra steps last week to prompt a quick and healthy recovery. Thanks to the Stamp Duty Announcement for property worth up to half a million pounds, the number of query requests has increased sharply, with Rightmove noting a 49% increase in interest for properties valued between £400,000 and £500,000, and mortgage brokers also noticed a hike in interest as buyers look to make the most of the tax cut.
So how does it work?
Let’s remind ourselves of the previous rules: To start with, first-time buyers purchasing a property at £500,000 or less paid no tax on the value up to £300,000, and 5% on the portion between £300,001 and £500,000.
The new announcement raises the nil rate all the way up to £500,000 for purchases that take place before March 31, 2021. This means that first time buyers can make savings of up to £15,000.
According to Zoopla, this fantastic news means that over the next 9 months 89% of sales will be exempt from the basic level of stamp duty – that’s 73% more than the current exemptions.
The same source states that across 28 local authorities in England the proportion of sales incurring stamp duty will fall by 85%. Overall this initiative could save buyers a total of £3.8 billion.
What about buyers of new homes and BTL purchasers adding to their portfolio?
Again, first thinking about the previous regulation for buyers of new homes, this has been a tiered system:
- starts from 3% tax on the first £125,000,
- moves to 5% between £125,001 and £250,000,
- then 8% between £250,001 to £925,000,
- 13% between £925,001 to £1.5 million,
- and 15% thereafter
Under the new rules, purchasers of additional property they won’t be living in themselves only pay the rate of 3% on the first £500,000 of the property’s price, until March 31st 2021.
Here’s a quick table to break down the savings for purchases of additional properties*:
|£150 – 200k||£0.5 – 1.5k|
|£200 – 250k||£1.5 – 2.5k|
|£250 – 300k||£2.5 – 5.0k|
|£300 – 350k||£5.0 – 7.5k|
|£350 – 400k||£7.5 – 10.0k|
|£400 – 450k||£10.0 – 12.5k|
|£450 – 500k||£12.5 – 15.0k|
Across the UK the stamp duty bill is expected to fall by 22% for investors, certainly encouraging those who were on the edge to commit to their purchase. It’s crucial to note that overseas investors are just as able to capitalise on the relief scheme as home-grown buyers. Remember that this ‘holiday’ period ends March 31st 2021, and that foreign buyers have already been told to expect a 2% increase in tax from April 2021.
Both potential overseas buyers and those at home will have to seriously consider making their move in the near-term.
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