This is what’s happening with stamp duty rates over the coming months

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This is what’s happening with stamp duty rates over the coming months

 

The stamp duty ‘holiday’ in England, Northern Ireland and Wales has been extended until 30 June this year. What does this mean for you if you’re in the process of buying, or even thinking about it?

A progressive stamp duty rate system has been in place since 2014. Instead of paying a single rate on a property’s total price, you might pay one rate on a certain portion of the property and a different rate on another.

              

Then came the pandemic, and a stamp duty ‘holiday’. Paul Broomham of Alexander & Co discusses the effects: ‘The saving on stamp duty has made a big impact on the market, but I think a lot of it is down to COVID in the first instance. That’s the catalyst, and the stamp duty has been the vehicle to help people get over the line and make that decision.’

The threshold at which you start paying stamp duty (in England) was temporarily increased, and originally scheduled to end in March 2021. This holiday has now been extended until the end of June, and it will be tapered after that.

Why time is of the essence

If you’re in the process of buying a home, it would make sense to push for completion as soon as possible. If you’re about to buy or thinking about it, it may be difficult to take advantage of the reduced stamp duty rates. But if you do start now, you may be able to enjoy some benefit if everything moves fast enough (and you will have to move fast!)

Paul Broomham explains: ‘People wanting to move now are seeing the stamp duty cut-off as their opportunity to buy, and rather than paying the stamp duty and giving it as a tax to the government, they can invest that into a new kitchen, get the en-suite fitted, landscape the garden, or put down a bigger deposit and get a better interest rate on their mortgage.’

How it all works:

  • Until 30 June: no stamp duty to be paid on the first £500,000 of any primary residential property.
  • 1 July – 30 September: no stamp duty on the first £250,000 of any primary residential property.
  • 1 October onwards: normal stamp duty rates apply (the rates in place pre-pandemic).

 

 

Stamp duty in England and Northern Ireland (until 30 June)

PURCHASE PRICE

RATE ON MAIN RESIDENCE (1)

RATE FOR ADDITIONAL PROPERTIES (2)

Up to £500,000

0%

3%

£500,001 – £925,000

5%

8%

£925,001 – £1,500,000

10%

13%

£1,500,001

12%

15%

(1) Rate applies to that portion of the purchase price. (2) Additional properties bought for less than £40,000 will be charged the main residence rate of stamp duty.

 

Here are two examples of what happens until 30 June:

  • If you buy a property for £400,000, you'll pay no stamp duty at all.
  • Say you’re buying a property for £750,000: you pay nothing below £500,000, then pay 5% between £500,000 and £925,000, which is £12,500.

 

Stamp duty in England and Northern Ireland (from 1 July until 30 September)

PURCHASE PRICE

RATE ON MAIN RESIDENCE (1)

RATE FOR ADDITIONAL PROPERTIES (2)

Up to £250,000 (up to £300,000 for first-time buyers)

0%

3%

£250,001 – £925,000

5%

8%

£925,001 – £1,500,000

10%

13%

£1,500,001

12%

15%

(1) Rate applies to that portion of the purchase price. (2) Additional properties bought for less than £40,000 will be charged the main residence rate of stamp duty.

 

Here are two examples of what happens 1 July – 30 September:

  • If you buy a property for £250,000, you'll pay no stamp duty at all.
  • Say you’re buying a property for £600,000: you pay nothing below £250,000, then pay 5% between £250,000 and £925,000, which is £17,500.

What it means for first time buyers

‘It’s harder and harder for first time buyers to get on the ladder,’ Paul Abel of Alexander & Co explains. ‘After 1st October it goes back to 2% on £125,00-£250,000. If the government is really keen on getting first time buyers into the market over the coming 12 months, then a further concession of moving that to £250,000 would be the right thing to do, in my view.’

Many purchasers – first time buyers and homeowners – have decided to make the move earlier than they had originally planned as a result of this stamp duty holiday. If you’re quick and things go in your favour, you could make the most of this extended holiday too.

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