Stamp Duty- What is it and how could a Stamp Duty Holiday affect you?
Rishi Sunak is expected to announce a Stamp Duty cut or holiday- what does this mean for home movers and how could this affect the property market?
What is stamp duty?
Stamp Duty Land Tax (SDLT) is a tax paid by people buying properties in the UK, the amount however varies depending on the circumstances.
In England and Northern Ireland stamp duty is paid on land or property which is sold at £125,000 or above.
If you are a first time buyer you will already benefit from an exemption on any property up to £300,000 (and pay 5% on £300,000 to £500,000).
If you are already a home owner stamp duty rates are currently as follows:
Up to £125,000 Zero
The next £125,000 (the portion from £125,001 to £250,000) 2%
The next £675,000 (the portion from £250,001 to £925,000) 5%
The next £575,000 (the portion from £925,001 to £1.5 million)10%
The remaining amount (the portion above £1.5 million) 12%
Landlords pay an extra 3% of stamp duty when purchasing a buy-to-let property.
What is Rishi Sunak expected to announce?
There has been a lot of speculation that stamp duty on homes up to £500,000 could be suspended. It is thought this could be a six month "holiday" to help recovery of the housing market. This could save buyers tens of thousands of pounds. It is not clear yet whether this could also apply to landlords.
If the threshold for Stamp Duty is increased to somewhere between £300,000-£500,000 then a property purchased at £280,000 would not be subject to any charges. Under the current SDLT charges this would cost a home mover £4000 .
What does this mean?
A stamp duty holiday will likely encourage a busier market place with more home owners looking to move to take advantage of the savings. This could also help other sectors of societ by providing a kickstart to economic activity.
The property market has long suffered from short supply so these measures would be welcomed by the industry but only if they are implemented immediately. Any delay in the start date for the tax cut would cause a freeze on the housing market whilst buyers wait for the tax cut.